Takafumi Horie, the internet tycoon who took on Japan’s business establishment with his get-rich-quick mantra, was on Friday sentenced to two-and-a-half years in prison for securities fraud.
Horie (34) showed no emotion as the judge delivered his ruling at the Tokyo district court, ending the latest stage in a case that some are calling “Japan’s Enron”.
The court granted Horie bail while his lawyers lodge an appeal.
Horie, a Tokyo university dropout who in the space of a decade built the internet portal Livedoor into a empire worth $6-billion at its peak, had pleaded not guilty to making false financial statements in a bid to hide Livedoor’s losses and boost its share price.
Throughout his six-month trial he maintained that he had been targeted by traditional business interests appalled by his near-effortless acquisition of wealth through aggressive buyouts of other firms.
The judge, Toshiyuki Kosaka, said Horie had masterminded the construction of a network of dummy investment partnerships “for the purpose of evading the law”.
“At that point, the prosecution’s case was proven,” he told a packed courtroom.
Prosecutors said Livedoor had deliberately misled investors in 2004 by reporting a pre-tax profit of about ¥5-billion to hide losses of ¥310-million.
One such fund, Kosaka said, “had nothing to do with Livedoor’s main business … its purpose was to manipulate Livedoor’s accounts”.
Horie, dressed in a dark blue suit and tie rather than one of his trademark designer T-shirts, consulted court documents as the judge read out details of the ruling.
In a sign of the impact Horie has had in Japan, Kosaka took the unusual step of offering him words of encouragement.
Citing a letter he had received from the parents of a young disabled woman who had been inspired by Horie to overcome her disability, find a job and spend some of her earnings on Livedoor shares, he said: “Although you may have been found guilty, it doesn’t mean that everything about you has been condemned.
“I want you to make amends for what you did and then start your life anew.”
But Horie’s lawyer, Yasuyuki Takai, said he feared the ruling would discourage talented young entrepreneurs from attempting to break the mould of Japanese business.
“People who take up new challenges have no choice but to challenge legal ambiguities,” he told a news conference.
“I cannot understand why there is a prison sentence. I regret to say that my disillusionment with the Japanese criminal justice system has only worsened.”
Horie’s lawyers claimed the prosecution had relied too heavily on ambiguities in the law’s treatment of aggressive takeovers, and on the testimony of Livedoor’s former chief financial officer, Ryoji Miyauchi, who is being tried separately along with three other Livedoor executives.
Miyauchi, who has pleaded guilty to charges of violating the securities law, will learn his fate on March 22.
Prosecutors had demanded a four-year prison sentence for Horie, an unrepentant hedonist with a penchant for Ferraris and actress girlfriends. His repeated denials of wrongdoing and his verbal assaults on his accusers could have influenced the decision not to give him a suspended sentence, as many had expected.
Japanese executives accused of white-collar crimes in Japan often plead guilty, apologise, and avoid prison.
His treatment contrasted with that of Yoshiaki Tsutsumi, the former chairperson of Seibu Railway — and once the world’s richest man — who received a 30-month suspended sentence and a Â¥5-million fine in 2005 after pleading guilty to insider trading and falsifying information about shareholders.
Horie’s dramatic fall is a blow to those who saw him as a trailblazer for a more energetic, riskier style of business and a refreshing contrast to the dour, middle-aged executives who dominate corporate Japan.
Once a little-known, slightly geeky figure with an undiluted faith in the potential of the dot.com age, Horie penetrated the public consciousness with bold but unsuccessful bids for a professional baseball team and a television network.
In September 2005, he made a failed attempt to enter Parliament as a reform-minded independent with the personal blessing of the then prime minister, Junichiro Koizumi.
The mainstream media’s adoration for Horie quickly turned to disdain after his arrest in January last year, but some Livedoor investors, who have seen the value of their shares plummet, had expected a more lenient sentence.
“I was a little surprised as the ruling was harsher than I expected,” Ichiro Shimizu, said in a TV interview. “I think the court carefully judged just how much damage was done to shareholders.”
The value of Livedoor shares plunged after investigators raided its offices in Tokyo’s Roppongi Hills complex — a magnet for Japan’s nouveau riche — in January last year. The raid sent Japanese stocks into freefall and forced an embarrassed Tokyo Stock Exchange to close early amid fears that the volume of sell orders would overwhelm its computer system.
Livedoor’s market value plunged by $5-billion after Horie’s arrest, prompting a separate lawsuit from shareholders. Shares in the firm were trading at about Â¥700 each before the raid; by the time Livedoor was delisted from the TSE last April they were worth just Â¥94. – Guardian Unlimited Â