The founder and former CEO of Japanese Internet portal Livedoor was found guilty of violating securities laws on Friday and sentenced to two and a half years in prison in one of the biggest cases of corporate abuse for Japan in recent years.
Presiding Judge Toshiyuki Kosaka said a prison term for Takafumi Horie, 34, was necessary, as the act of willfully misleading private investors was a serious crime. However, Kosaka said he wasn’t condemning everything Horie had done as an entrepreneur.
“I want you to make up for what you’ve done and start anew,” Kosaka said.
Livedoor’s securities scandal rocked the nation and has been dubbed the Enron of Japan, in reference to the U.S. company that declared bankruptcy in 2001 due to widespread accounting fraud. Many private investors who had bet on Livedoor stocks saw their life savings evaporate as Livedoor shares took a nosedive. Horie was arrested just over a year ago, and his company was delisted from the Tokyo Stock Exchange last April.
Horie’s lawyers called the trial unfair and said the guilty verdict would damage Japan’s entrepreneurial spirit. They plan to appeal the case.
Horie’s lawyers petitioned the court for his release, which was granted on bail of 500 million yen (US$4.3 million).
Prior to the fall from fame, Horie was the symbol of a new generation of Japanese entrepreneurs. He was a celebrity of sorts, more often referred to by his nickname, Horiemon, taken from a popular children’s animation character Doraemon. Horie founded Livedoor more than a decade ago as a Web consultancy and developed it into an Internet service provider with a popular portal and numerous other businesses. Over time, the company pulled off several large takeovers. Horie gained fame by trying to buy a baseball team and run for public office with the backing of then-Prime Minister Junichiro Koizumi. He also authored several books, including some bestsellers, on how to succeed in business.
“The case is based on ambiguous evidence,” said Horie’s lawyer, Yasuyuki Takai. “I’m very disappointed.” Takai said the court even admitted that the prosecutors’ search and indictment weren’t fair, yet gave Horie a prison sentence anyway.
The Tokyo District Court ruled that investment funds set up in Hong Kong and elsewhere were used to evade the law and had nothing to do with Livedoor’s business. The judge said e-mails exchanged between Horie and others showed he was well aware of the illicit transactions and that testimony from Livedoor’s former chief financial officer, Ryoji Miyauchi, and others were consistent and credible enough to make the conviction.
Horie had pleaded not guilty to the original charges, saying he was unaware of any wrongdoing at his company. Prosecutors had sought a four-year prison term.
As the almost two-hour long judgment was read to the court, Horie, who was clad in a dark suit and dark tie, a marked change from his usual casual dress code, flipped through papers, glanced back and forth at the judge and fixed his tie. He once exited the courtroom for just a few minutes, and his lawyer said later that Horie had not been feeling well that day.
A verdict for Miyauchi is set for next Thursday, March 22. The former CFO pleaded guilty to charges, admitting to cooking the books at Livedoor.
-Yuriko Nagano, IDG News Service (Taipei Bureau)
(Additional reporting by pool reporters.)
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