July 27, 2008

Ex-CEO of Livedoor Loses Appeal

By From news reports

A Japanese appeals court upheld on Friday the conviction of a former Internet entrepreneur, Takafumi Horie, in a case that has come to symbolize Japanese efforts to deal with white-collar crime at start-up companies.

The Tokyo High Court rejected Horie's appeal of a lower-court conviction of securities laws violations. He was found guilty in March 2007 of masterminding a network of decoy investment funds to manipulate earnings at his Internet services company, Livedoor.

Horie, who has repeatedly said he was innocent, will take his case to the Japanese Supreme Court, his lawyer, Yasuyuki Takai, said after the ruling.

"We definitely cannot accept this decision," he said on an NHK television news show. "It is incomprehensible."

Also upheld Friday was the Tokyo District Court decision that sentenced Horie to two and one-half years in prison. In Japan, it is still quite rare for an executive to get a prison sentence for white- collar crimes. He is out on bail.

At the time of the lower-court ruling, the judge had said Horie and Livedoor had caused great damage to investors. The Tokyo company's false earnings reports had grave social consequences in wreaking havoc on Tokyo markets, the judge said.

The appeals court said it agreed with that ruling, arguing that Horie as chief executive played a key role in the dubious funds set up for stock swaps and other schemes to pad Livedoor books, according to Japanese media reports.

The raid on Livedoor's offices and Horie's subsequent arrest in 2006 sparked a frenzied market sell-off dubbed "Livedoor shock" that led the Tokyo Stock Exchange to curtail trading over capacity problems.

For many younger Japanese, the 35-year-old Horie represented a new model of entrepreneurship, expanding a $50,000 Internet start- up into a conglomerate worth $6 billion at its peak.

At the height of his glamour, Horie, a dropout of the prestigious Tokyo University, was a television star, both adored and despised in this conformist culture. He was often shown at ritzy parties with celebrities, and even ran for political office.

His takeover attempt of a radio broadcaster to gain managerial influence over the media group Fuji Television Network also drew widespread attention.

Prosecutors had demanded a four-year prison term for Horie in the lower-court trial.

Horie's lawyers, as well as some analysts, say he is being singled out, partly because of his defiance of a corporate culture long dominated by big-name companies. Even Horie's assertion of innocence was unusual in a nation where 99 percent of criminal trials end in guilty verdicts and a show of remorse can help win leniency.

Horie has blamed what he called the old-style bureaucratic power elite in Japan as unfairly singling him out for merely trying to create change.

Before his arrest, he had publicly boasted that he was taking advantage of gray areas and loopholes in what he called Japan's primitive stock trading regulations to make millions.

"I stood out too much," Horie said during a 2006 interview. "Tackling something new means doing what's not considered yet by the legal system."

Several Livedoor executives and accountants have been found guilty and Livedoor was given the largest fine in corporate Japanese history, yen280 million, or $2.6 million, for violating securities laws.

Originally published by AP, Reuters.

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