Livedoor Execs Admit Securities Violations

The Associated Press
Friday, May 26, 2006; 8:12 AM

TOKYO -- Japanese prosecutors accused a former Internet venture star Friday of calling the shots in a complex scam to inflate stock prices and doctor company books in the opening of a trial against the company and its former executives.

Disgraced Internet company Livedoor acknowledged on Friday it was guilty of violating securities regulations. Former Livedoor executive Ryoji Miyauchi, one of the defendants in the trial opening in Tokyo District Court, said on nationally televised news that he was pleading guilty.

Livedoor Co.'s flamboyant former chief executive, Takafumi Horie, 33, who was the darling of the Japanese media before his arrest in January, will be tried separately and a date has not yet been set for his trial. Horie, released on bail in April, has repeatedly said he is innocent.

Less than 1 percent of district court criminal trials in Japan result in innocent verdicts, according to Japanese Supreme Court data. Most defendants try to win a lenient sentence by showing remorse and admitting to all the charges. Horie's trial promises to be an unusual case because he is determined to fight to assert his innocence.

Besides Miyauchi, defendants in the case include three other former executives, two auditors, the company itself and a subsidiary, Livedoor Marketing.

But in opening statements Friday, prosecutors were already jockeying to make their case against Horie by arguing that it was always Horie who had ordered the other executives to use dubious methods to buy up other companies, declare profits when there were actually big losses, set up "dummy" companies and jack up stock prices to raise the capital value of their corporate group.

"You mean we can make that much money?" Horie was quoted by prosecutors as asking two defendants in 2003 after learning about how Livedoor earnings could be inflated.

"Let's put it in our budget then and revise our outlook upward," he was quoted as saying in prosecutors' statements, a copy of which was received by The Associated Press.

In the court session, Miyauchi acknowledged wrongdoing, but the other defendants acknowledged only parts of the allegations, Kyodo news agency said. Court officials could not confirm the proceedings.

"The management methods weren't good," Miyauchi told public broadcaster NHK TV before heading to the trial. "I can only wait for what the judges decide."

TV news showed throngs of people lining up to draw lots to enter the courthouse to see the trial.

Livedoor spokesman Koichiro Ota said the company is not fighting the charges, and attorneys representing the company filed the guilty plea on behalf of Livedoor.

Violation of securities laws carries a maximum penalty of up to five years in prison and 5 million yen ($44,000) in fines, upon conviction.

Three executives _ Miyauchi, Fumito Okamoto and Osanari Nakamura _ were arrested in January and charged with using stock swaps and stock splits to artificially inflate share prices, and of giving false information about a subsidiary's earnings. Another Livedoor executive, Fumito Kumagai, was arrested in February.

Since Horie's arrest, shares of Livedoor plunged about 90 percent and were delisted in April after six years of trading.

Horie, a college dropout whose T-shirt attire was a trademark, stood out for his defiant style in a corporate culture renowned for hierarchical relations and conformity. Horie had tried to buy a professional baseball team, appeared often on TV shows and ran unsuccessfully for a Parliament seat.

The scandal has prompted analysts to say Japan may need clearer laws about securities as well as heavier penalties for padding company books. Some blame the government for letting Horie test legal loopholes and limits because Livedoor's aggressive takeovers were widely known.

© 2006 The Associated Press