Horie Gets Two-and-a-Half Years Prison in High-Profile Trial

Former dot-com mogul Takafumi Horie was found guilty of securities laws violations and sentenced to two-and-a-half years in prison on Friday, in a case that has come to symbolize the challenges Japan faces in policing rising startups.

The defense team appealed the ruling shortly after the verdict. Horie, who pleaded not guilty, posted bail at 500 million yen ($4.3 million; 3.3 million euros), a court official said, speaking on customary condition of anonymity.

Before his January 2006 arrest, Horie had been a celebrity in Japan, fascinating the public with his flashy buyout attempts of a professional baseball club and a media conglomerate.

During the trial, which began last September and has drawn intense Japanese media coverage, Horie had said he had been framed and accused prosecutors of having targeted him for standing out too much with his brash, unconventional business style.

Chief Judge Toshiyuki Kosaka said Horie masterminded an elaborate network of decoy investment funds that were "established for the purpose of evading the law" and to "manipulate Livedoor's accounting."

"At that point, the prosecutors case was proven," he said in handing down the ruling.

Prosecutors had demanded a four-year prison term for the 34-year-old founder and former head of Internet services firm Livedoor Co., which Horie guided from unknown startup to household name.

Nearly all criminal trials in Japan end with guilty verdicts, but executives charged with such white-collar wrongdoing generally get a suspended sentence, and avoid prison.

At the end of his nearly two-hour statement, the judge had kind words for Horie, who had become a celebrity before his downfall.

"Although you may have been found guilty, it doesn't mean that everything about you has been condemned," Kosaka said.

He told Horie he had received a letter from "a parent with a handicapped child" who was inspired by Horie's dreams and had bought Livedoor stock and still has them.

"I want you to make up for what you've done and start your life anew," Kosaka said.

Horie, dressed in a dark suit and tie, sat passively through most of the session, at times shuffling through papers on his desk.

His chief lawyer, Yasuyuki Takai, said he feared the verdict will squelch young people's drive to take up challenges.

"People who take up new challenges have no choice but to challenge legal ambiguities," Takai said at a news conference at the courthouse.

He said the case was based on ambiguous evidence and the testimony of two former Livedoor executives who have already pleaded guilty to similar charges and are being used as key witnesses against their former boss and friend.

The two key prosecution witnesses, including former Chief Financial Officer Ryoji Miyauchi, are being tried in a separate trial on charges of securities laws violations. A ruling is scheduled for that case March 22.

"I cannot understand why there is a prison sentence," Takai said. "Regrettably, my disillusionment with the Japanese criminal justice system has only gotten worse."

Outspoken Millionaire

Horie had drawn widespread media attention here as an outspoken millionaire challenging this nation's corporate culture long been dominated by big-name companies that conducted business through a cozy network of group-linked companies.

Horie was known for his cocky flamboyance that stood out among drab, old-fashioned executives, and his downfall stunned the nation. More than 1,600 people drew lots for 63 gallery seats to see the session.

Some experts say companies like Livedoor that made aggressive acquisitions were just beginning to emerge, and Japan still lacked clearly defined laws to police such moves.

Horie tumbled from stardom when prosecutors raided his company last year and then arrested him. He was kept incarcerated for three months, but he did not sign a confession as most suspects tend to do in Japan, often to win lighter sentences.

Some Livedoor shareholders were pleased by the verdict, saying it recognized the financial damages they suffered because of the fraudulent accounting.

Livedoor, which operated an Internet portal and offered Web-related services, drew a large number of individual investors, partly because of Horie's fame. Those investors, many of them amateurs at the stock market, took big losses when Livedoor shares nose-dived after Horie's arrest and were later delisted.

About 3,600 individual investors have sued Horie and Livedoor for damages, saying they were duped to buy falsely valued shares.

Chohei Yonekawa, who represents a group of investors, said Friday's ruling will help their case.

"It shows guilt," he said. "It is proper the verdict includes a prison term."

Horie was not immediately available for comment. In an interview with The Associated Press three months ago, Horie said he is now looking to build a new business for consumer space travel and is working with several people to develop a rocket in Tokyo.

"Bureaucrats just want people to keep working by the sweat of their brow, without thinking and putting their savings in the bank," he said then. "That's the way they think, and there's not much anyone can do about it."


Associated Press writer Kana Inagaki contributed to this report.