• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Japan PM in Hot Seat After Livedoor CEO Arrested

Posted on: Tuesday, 24 January 2006, 07:30 CST

By Linda Sieg and Teruaki Ueno

TOKYO -- Japanese Prime Minister Junichiro Koizumi came under fire on Tuesday after the arrest of a brash young Internet CEO who shook up corporate Japan and ran for parliament with ruling party backing as a poster boy for reform.

Takafumi Horie, chief executive of Livedoor Co., was arrested on Monday evening on suspicion of breaking securities laws by spreading false information to manipulate share prices.

A raid on Livedoor by authorities a week ago sparked chaos on the Tokyo stock market, sent share prices plunging and overwhelmed the exchange's computer system with sell orders.

On Tuesday, though, the Nikkei share average rebounded on hopes that the worst of the "Livedoor Shock" was over.

Horie, 33, a pudgy college dropout, became an icon of a dynamic "New Japan" after his spurned attempt to buy a baseball team and a rare takeover battle with a giant media group.

Koizumi tapped Horie to run in a lower house election last September, and ruling Liberal Democratic Party (LDP) Secretary General Tsutomu Takebe and Internal Affairs Minister Heizo Takenaka, Koizumi's pointman for reform, campaigned for him.

"Secretary General Takebe and Minister Takenaka worked hard to make him (Horie) a hero," opposition Democratic Party lawmaker Satsuki Eda told Koizumi in parliament.

"What sort of responsibility do you feel for this?"

Eda also said market-based reforms pushed by Koizumi since he sprang to power in 2001 were behind a breakdown in business morality. "The sense of ethics is crumbling to a crisis level," he said. "The government must take these cases seriously."

Koizumi dismissed the criticism.

"This case and support by LDP executives for Mr. Horie in last year's election are separate matters," he said.

Takebe -- who called Horie his "son" on the campaign trail -- blamed himself.

"I supported (Horie) on my own judgment, without consulting with Prime Minister Junichiro Koizumi," he told reporters. "I personally think I should reflect on what I should do."

PURSUIT OF PROFITS

Koizumi is set to step down as prime minister when his term as LDP president expires in September, but he has stressed that his successor should forge ahead with reforms to lessen the heavy hand of government in the world's second-biggest economy.

Prosecutors say Horie and three other executives who were also arrested had sought to boost share prices by spreading false information, issuing new shares to "acquire" firms already under its control and then selling them for a profit to pad its books.

A former Livedoor executive was found dead last week in an apparent suicide after being questioned by prosecutors.

Horie said in his Web diary on Sunday he had no recollection of doing anything illegal.

The most famous resident of the posh Roppongi Hill complex in central Tokyo, Horie on Monday was in a Tokyo detention center, where he can be held for about three weeks before prosecutors must charge him or let him go.

The Livedoor case has prompted calls to beef up Japan's securities watchdog, as well as laments about the unabashed pursuit of wealth with which Horie became identified.

"The Livedoor shock has poured cold water not only on stock prices, but on Mr. Horie's often-emphasised view that money is everything," said an editorial in the Mainichi newspaper.

"We should not pursue fleeting profit. We should take Mr Horie's arrest as an opportunity to think about this."

The Nihon Keizai Shimbun business daily, however, warned against tarring all high-tech ventures with the same brush.

In a sign investors were getting that message, the share price of Yahoo Japan Corp. surged more than 6 percent after Japan's top Internet portal posted forecast-beating earnings.

Horie has many fans, especially among a younger generation who admired his innovative tactics and flashy lifestyle, and some saw his arrest as a reprisal from the "Old Japan" establishment which he had snubbed.

A dropout from the prestigious University of Tokyo, Horie set up Livedoor's predecessor, Livin' On the Edge, a decade ago with just $50,000 in capital.

By adopting an aggressive acquisition strategy and promoting himself as a brand symbol, he turned that into market capital of more than $6 billion just before last week's raid.

By Tuesday, about three-quarters of that value had evaporated. Livedoor was untraded with a glut of sell orders at 176 yen, down from 696 yen before prosecutors raided the company's offices on January 16.

(Additional reporting by Isabel Reynolds)

Source: REUTERS

More News in this Category