4 former Livedoor executives convicted

A Japanese court convicted four former executives of disgraced dot-com company Livedoor of inflating earnings reports Thursday in a scandal that destroyed one of the country's highest-flying Internet startups.

The rulings followed Livedoor founder and former CEO Takafumi Horie's conviction last week on similar charges of securities laws violations and his prison sentence of 2 1/2 years. Horie, who had pleaded not guilty, immediately appealed the decision.

On Thursday, Ryoji Miyauchi, Livedoor's former chief financial officer, was sentenced to 20 months in prison after he pleaded guilty. Three other former executives, who pleaded guilty to some of the charges, were given suspended prison terms, avoiding time in prison.

In the Japanese justice system, defendants can plead innocent, guilty to all the charges, or guilty to some of the charges while denying others.

The Livedoor scandal broke in January 2006, when prosecutors arrested Horie and other top executives on suspicion of securities laws violations. The news sparked a sell-off in the Tokyo stock market at that time amid widespread shock over the apparent downfall of Livedoor and Horie, who had become a celebrity for his gutsy takeover attempts and flashy lifestyle.

The executives were accused of setting up a number of funds to do stock swaps and other stock trading to pad their books. Prosecutors said the complex set of schemes fabricated 5 billion yen, or $42.5 million, in profit.

Presiding judge Toshiyuki Kosaka said Miyauchi was the chief architect of some of the schemes as No. 2 at Livedoor under Horie, but said Horie shared much of the blame because he was the chief executive.

Kosaka said that while the amount of fabricated earnings might have been relatively small, the crimes were serious because of the massive damage that the misleading reports about Livedoor's value had caused individual investors.

Livedoor had attracted a large number of such investors because of Horie's fame as an entrepreneur and his glamorous lifestyle. But they ended up losing money after the stock tanked and was eventually delisted.

"Securities trading calls for individual investors to take personal responsibility, but it also makes imperative that accurate information be presented to investors," Kosaka said, reading for more than an hour from a statement.

Miyauchi, 39, was repentant.

"If given the chance, I want to give something back after my release," to the people whom he caused trouble to, Miyauchi told the court.

Miyauchi was given a prison sentence, but Fumito Okamoto and Osanari Nakamura were given 1 1/2-year terms suspended for three years, and Fumito Kumagai was given a 1 year term suspended for three years, meaning that none of them would need to serve time.

Many Japanese view the trials of Horie and the other former Livedoor executives as a clear signal that authorities are intent about cracking down on dubious startups and policing new areas of potential securities laws violations.

Although Horie's prison term was shorter than the four years in prison the prosecutors had demanded, it was considered harsh by Japanese standards because executives here charged with such white-collar crimes generally avoid prison terms. Nearly all criminal trials in Japan end with guilty verdicts, with many suspects confessing to win lighter sentences.

Before his arrest, Horie was admired for his aggressive get-rich-quick schemes, which struck such a contrast with the staid conformity of the traditional business elite.

Horie, a college dropout, had drawn widespread media attention here for trying to buy a professional baseball team, taking over a media conglomerate and running for a seat in Japan's parliament. He failed at all three efforts but became a celebrity, often seen on TV. He became a millionaire by selling Livedoor stocks at the height of their value.

The Livedoor case has prompted calls for clearer laws about stock trading as well as heavier penalties for falsifying earnings reports. Horie is widely perceived as having tested the legal loopholes and limits of Japanese securities laws.

Shimpei Fujita, an 18-year-old law student who was trying to get into the courtroom, said he was intrigued by the Livedoor trials because they raised questions about untested territory in Japanese business practices.

"In a sense, if you say what they did was a crime, it looks like a crime," he said. "But if you look at it another way and say it's not, then it looks like it wasn't."

source:www.chron.com