How Japan's internet king lost his crown

It began with a tip-off to the media that the offices of one of Japan’s top internet entrepreneurs were going to be raided. Soon dozens of reporters were camped outside, a whiff of scandal in the air.

Two days later, the Tokyo stock market was in turmoil and more than $300-billion had been wiped off the market value of Japanese companies, equivalent to the annual output of a small European country.

In an unprecedented move, the world’s second-largest exchange was forced to close early to prevent an avalanche of sell orders crippling its computer system, dealing a severe blow to its credibility.

How did it ever come to this?

No charges have yet been brought and investigators have not even officially announced what they are probing, but each day fresh allegations emerge in the media that Livedoor tricked investors to hide losses and broke securities laws.

Livedoor, which offers internet portal and other web services, is not even listed on the main section but on a market for start-ups, and the extent of the alleged cover-up pales in comparison with recent scandals such as Enron.

Even so, the scandal embroiling Livedoor and its high-profile founder, Takafumi Horie, sparked fears that Japan’s internet firms might come tumbling down like a house of cards and sent the stock market briefly into freefall.

The debacle has not only dragged the Livedoor name through the mud, it has also severely tarnished the reputation of the Tokyo Stock Exchange, which had already been hit by a string of problems with its computer system.

The saga took a morbid new twist on Thursday when it emerged that Hideaki Noguchi, a former executive at the group and key adviser to Horie, had been found dead in an apparent suicide.

Fall from grace

Horie, previously regarded as a breath of fresh air in the stuffy world of flat-footed, grey-suited businessmen, has suffered a swift fall from grace.

The 33-year-old Ferrari-driving entrepreneur built one of Japan’s top internet empires with an aggressive expansion drive that made him few friends among the corporate old guard.

Now the establishment seems to be getting its revenge.

Horie, nicknamed “Horie-mon” after a Japanese cartoon character, has famously declared, “All the evils come from aged business managers” and “I will kill newspapers and television”.

He has taken corporate Japan aback by wearing a T-shirt as he negotiates with men in suits and by complaining loudly of being bored with the business world’s slow decision-making.

He appears frequently on television, often with a model on his arm, and has boasted that money can buy him anything.

He was even courted by Prime Minister Junichiro Koizumi to run for Parliament in Lower House elections in September last year, although he failed to win a seat.

The entrepreneur has tried to buy a struggling baseball team and launched a fierce takeover bid for Japan’s most watched network, Fuji Television. Both times he failed—but also earned valuable publicity.

“He may have been the guru of the Horie-mon religion,” said prominent Japanese lawyer Toru Nagasawa.
But, in reality, “Livedoor was a castle in the sand,” he said.

The Nihon Keizai Shimbun business daily said prosecutors would seek to question Horie himself, believing he knew his company misled investors to hide losses.

Investigators appeared to be aiming for maximum publicity by waiting until nightfall on Monday before marching into Livedoor’s headquarters on the top floor of Roppongi Hills, one of Tokyo’s premier business addresses.

Under the glare of the television cameras and about 100 reporters who were tipped off in advance, they then continued the search at Horie’s home in the office, shopping and residential complex—just in time for the evening news.

You could almost hear the sighs of relief in boardrooms across Tokyo.—Sapa-AFP

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