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Japanese Corporate Raider Is Arrested

A user of U.S.-style tactics such as hostile bids admits to violating insider trading law.

June 06, 2006|Bruce Wallace | Times Staff Writer

TOKYO — Yoshiaki Murakami, a corporate raider in a country that has few of them, was arrested Monday on suspicion of insider stock trading, the second major strike this year by securities regulators against Japan's new generation of hypercapitalists.

The arrest came after Murakami's admission hours earlier in a nationally televised news conference from the Tokyo Stock Exchange that he inadvertently "broke the law" by buying shares in a media company he had "heard" would be the target of a hostile takeover.

Murakami's fall reverberated throughout corporate Japan, which he had tried to change with aggressive shareholder activism since leaving his job as a trade ministry bureaucrat to form a private equity fund in 1999.

"I am a professional among professionals in the stock market," he said after offering a traditional bow of remorse before the cameras. "I realized I made a mistake."

With that, the 46-year-old Murakami announced he was leaving the securities business and retiring from the $3.6-billion MAC Asset Management he built and which is commonly known here as the Murakami Fund. He faces as much as three years in prison and a possible $30,000 fine.

He takes billions of yen in profit with him, and a reputation as the rare investor prepared to fire rockets into boardrooms filled with contented executives. Critics say Japanese companies tend to have low stock values and pay small dividends because they act in the interests of entrenched management with guaranteed lifetime employment at the expense of shareholders.

Murakami refused to be stifled by the companies in which he held stocks, including railroad, real estate and broadcasting firms. Using U.S. investment techniques such as hostile takeovers that have long been shunned in Japan, Murakami tried to pry open the door that kept shareholders at arm's length from corporate managers.

"Murakami's ambition was to change Japan," said Aiichiro Mizushima, author of a book about Murakami. "Before Murakami, investors' knowledge was very limited.... Now they have learned from Murakami how to watch companies and management to see if they are lazy or not."

His abrasive approach made Murakami a rash of enemies. His style was derided as too "Wall Street" by a Japanese business establishment that disliked his open lust for profit and feared the threat he posed to traditionally cozy corporate practices.

"Japanese management still thinks they own the company rather than working for the shareholder," said George Lobley of Dalton Investments, a Los Angeles-based firm that invests in Japanese companies. "There is a perception here that if you satisfy your bankers and a few key clients, you're fine."

Murakami's admission of guilt also raises questions of whether Japan's new free-market champions have lost sight of their reforming agenda as they have grown richer by possibly abusing loopholes in the system they claimed to detest.

Murakami's arrest was the second major strike by prosecutors in five months against titans of Japan's new celebrity business culture. In January, police arrested and later charged billionaire Internet mogul Takefumi Horie with securities violations, claiming he and senior executives at his Livedoor Co. doctored company books in an effort to manipulate share prices.

Horie, 33, has pleaded not guilty and faces trial in July.

Horie's top executives have confessed to prosecutors' charges. It was the Livedoor investigation that appears to have uncovered evidence of the alleged trading violations that led to Monday's arrest of Murakami.

Horie and Murakami are close friends and business associates. Mizushima describes Horie as a Murakami protege, similarly ambitious and competitive.

In late 2004, prosecutors say, the two discussed buying shares to take over Nippon Broadcasting System Inc., which was seen as the route to a hostile takeover of the massive Fuji TV network.

Over a three-month period, the Murakami Fund bought about $900 million in Nippon Broadcasting shares and was well positioned when Livedoor stunned the Japanese establishment by announcing it had accumulated a 35% stake in the company, mostly through after-hours trades that are seen here as ungentlemanly, if legal.

The news sent the media giant's stock shares soaring and generated huge profit for the Murakami Fund.

Prosecutors contended that Murakami's advance knowledge of Horie's intentions constituted insider trading. Murakami initially rejected that allegation during questioning Sunday, saying he was unaware that Horie planned to buy more than a 5% stake in the broadcaster.

But Murakami later said he was guilty of at least a technical violation of the law.

"I didn't mean to break the law but I admit I did," Murakami said Monday.

But many here say there is a whiff of a show trial to the 80 minutes of televised contrition. The conservative Yomiuri Shimbun newspaper said Murakami's claim that he did not mean to break the law was "hard to believe."

The paper joined in widespread speculation that the admission of guilt was a way to wipe the legal slate clean and keep his fund in business.

"His ultimate goal was to keep the trust of his investors and save the fund itself," biographer Mizushima said. "His apology was for investors.

"But the real victims are ordinary investors who were trading based on the fair and just rules. Murakami should have made an apology to them."

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Times staff writer Hisako Ueno in Tokyo contributed to this report.

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