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Business upstart convicted in Japan

March 16, 2007|Bruce Wallace | Times Staff Writer

TOKYO — The self-styled rebel of Japanese business was convicted today of breaking securities laws after a prosecution that many here saw as an attempt by the corporate establishment to snuff out a financial upstart whose only crime was his refusal to play by traditional rules.

The Tokyo District Court found fallen Internet mogul Takafumi Horie guilty of misleading markets about the financial health of his Livedoor business empire to drive up its stock price. He was sentenced to 2 1/2 years in jail.

The verdict, like the raid on Horie's home and office that marked the beginning of his downfall more than year ago, was carried live on Japan's major TV networks.

Horie's guilty verdict had been widely predicted after a five-month trial that proved to be anything but predictable. Horie had pleaded not guilty -- a rarity in Japan -- and aggressively attacked the case against him as a politically motivated smear by an old guard of corporate leaders and its allies in the media and prosecutor's office.

In 10 years, Horie had built Livedoor from an Internet start-up into a media giant, relying heavily on acquisitions financed by the company's rising stock value. He also exploited loopholes in a Japanese financial system that was built for a more staid era of corporate finance. Horie used stock splits and after-hours trading to expand his empire, as well as enticing thousands of Internet-based day traders into a stock market that had been the preserve of institutional investors.

Some observers, many of them foreign, applauded Horie's attempt to shake up the Japanese system. But most of the domestic establishment was alarmed by what it saw as a threat to comfortable Japanese business practices that feature a cozy relationship between bankers and company managers, as opposed to the American obsession with shareholder value.

They were also unsettled by Horie's personal style, which favored jeans and T-shirts instead of dark business suits. And they openly resented the cockiness that saw this arriviste try to buy his way into Japanese baseball and later mount a hostile takeover bid for one of Japan's biggest media companies.

Both attempts failed. And in January 2006, Tokyo prosecutors raided Horie's home and office looking for evidence of stock manipulation and false accounting. They detained four Livedoor executives for three weeks, including Horie, during which they issued a series of leaks to the media that portrayed Livedoor as a criminal house of cards.

The company's value fell by about 90% before trading in its shares was suspended in April. Three Livedoor executives pleaded guilty, with only Horie refusing to bend to the prosecutors' demands for a confession.

He is expected to appeal.

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