Japan's Horie Found Guilty, Gets Jail Sentence
Takafumi Horie, the 34-year-old Internet entrepreneur who rattled corporate Japan with his celebrity lifestyle and brash takeover bids, was found guilty and sentenced to two years and six months in jail on Friday for his role in a securities fraud at his former company Livedoor.
The sentence handed down by the Tokyo District Court was a harsh contrast with punishments typically meted out to Japanese executives convicted of white-collar crimes, who often receive suspended sentences after pleading guilty and showing remorse.
But a defiant Horie had insisted on his innocence to the end, a stance that may have marked him for tougher treatment.
A dropout from the prestigious University of Tokyo who used savvy marketing and an aggressive string of acquisitions to expand Livedoor's market value to a peak of $6 billion, Horie had called the charges "malicious" and blamed his chief financial officer for the accounting mess. Prosecutors had sought a four-year jail term.
The trial drew intense media attention in Japan, where opinions of the T-shirt-wearing, Ferrari-driving Horie were divided even before his arrest.
TV broadcasters, their helicopters hovering above the court, showed Horie looking relaxed and wearing a dark suit, white shirt and no tie as he entered the building.
Horie's attempt to buy a baseball team in 2004 and his takeover battle with a larger media group a year later won him admirers among young people but annoyed conservative business leaders.
"He was very, very different. The way he talked, the way he walked, the cars he drove, the way he lived," said Keith Henry, director of Asia Strategy, a consultancy that advises companies on Japanese policy issues. "In that sense, he very much stood out."
Among his fans was former Prime Minister Junichiro Koizumi, another maverick who tapped Horie to run in a 2005 national election as a poster boy for economic reform, though he failed to win a seat.
Horie traded his trademark casual wear for a suit during the trial and dropped some of the swagger that drove his rise to fame.
The author of a dozen advice books such as "How to Make 10 Billion Yen" and "The Easy Way to Build a Money-Making Company" claimed he relied so heavily on advisers that they came to dominate his company. "I never studied accounting," Horie testified in November. "A management book I read said to leave that to specialists, so that's what I did."
Four other Livedoor executives including the CFO, Ryoji Miyauchi, have pleaded guilty in the case.
Horie must also contend with lawsuits from shareholders over the $5 billion in market value shed by Livedoor following his arrest, which sparked a share sell-off that swamped the Tokyo Stock Exchange's computer system, keeping it on shortened trading hours for three months. Livedoor lost its Tokyo Stock Exchange listing last April after its share price sank to just 94 yen (80 U.S. cents).
The trial centered on problems with Livedoor's 2004 earnings. Prosecutors said Horie pressured aides to raise the company's interim recurring profit forecast to 5 billion yen from 3 billion yen using gains from the sale of Livedoor stock held in a Hong Kong-based investment fund, a
violation of accounting rules.
After the stock sale failed to raise earnings to the 5 billion yen target, Horie then signed off on a plan to book phony sales to allied firms to make up the difference, according to the prosecution.
Horie claimed he had only pushed managers to improve Livedoor's underlying business, in particular its money-losing media arm, not to fudge the books.
In another high-profile corporate scandal that gripped Japan, Yoshiaki Tsutsumi, once dubbed the richest man in the world, was sentenced in 2005 to 30 months in jail, suspended for four years, for insider trading and falsifying financial statements at his Seibu Railway group.