Japan Court to Rule on 4 Livedoor Execs

Takafumi Horie smiles during a news conference at the Foreign Correspondents Club of Japan in Tokyo in this Tuesday, Sept. 6, 2005 file photo. Disgraced dot-com tycoon Horie slammed his conviction and harsh sentence for securities fraud on Sunday, insisting he had committed no crimes and that he had more than paid for any mistakes by losing his company. (AP Photo/Itsuo Inouye, File) (Itsuo Inouye - AP)

TOKYO -- A week after the former chief executive at scandal-tainted dot-com company Livedoor received an unusually harsh prison term, a Japanese court is set to rule Thursday in the trials of four other executives facing similar charges of inflating earnings.

The trials of Takafumi Horie, the founder of Livedoor, and the other former executives are viewed by many Japanese as a clear signal that authorities are intent about cracking down on dubious startups and policing new areas of potential securities laws violations.

On Thursday, the Tokyo District Court is handing down the verdict and sentencing for Livedoor's former chief financial officer, Ryoji Miyauchi, and three other former executives _ Fumito Okamoto, Osanari Nakamura and Fumito Kumagai.

Prosecutors have demanded a 2 1/2 year prison term for Miyauchi, and 1 1/2 year prison terms for the others. Miyauchi has pleaded guilty, while the others have pleaded guilty to most of the charges.

Horie, who insists he is innocent _ a rarity in Japanese trials _ was convicted Friday on charges of securities laws violations and sentenced to 2 1/2 years in prison.

While that was shorter than the four years in prison the prosecutors had demanded, it was considered harsh because Japanese executives 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 crimes to win lighter sentences. Horie, 34, has appealed.

Before his arrest in January 2006, Horie was admired for his aggressive get-rich-quick schemes and flashy lifestyle, and even praised as a symbol of a new breed of Western-style entrepreneurship, which marked such a contrast with the staid conformity of the traditional business elite.

But in convicting Horie, judge Toshiyuki Kosaka, who is also presiding over the other executives' trials, said that the Livedoor executives had set up a number of funds to do stock swaps to pad their books.

The executives are being accused of using a complex set of such schemes to fabricate 5 billion yen, or $42.5 million, in profit. Kosaka has said Miyauchi was the chief architect of some of the schemes.

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 Parliament seat. He failed on all three efforts, but he became a star, appearing often on TV, and has become a millionaire from selling Livedoor stocks at the height of their value.

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

Livedoor 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. The shares were later delisted.

The Livedoor debacle 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 securities laws in Japan.