Controversial Livedoor boss arrested

Takafumi Horie, the brash young CEO of Internet firm Livedoor Co who shook up corporate Japan with his bare-knuckled business tactics and flashy lifestyle, was arrested yesterday on suspicion of breaking securities laws.

Prosecutors said Horie and three other executives who were also arrested had sought to boost share prices by spreading false information, issuing new shares to "acquire" firms already under its control and then selling them for a profit to pad its books.

A raid on Livedoor by authorities a week ago sparked chaos on the Tokyo stock market and sent share prices plunging across the board on huge volume that forced the market to halt trading.

Horie said in his web diary on Sunday he had no recollection of Livedoor doing anything illegal.

The pudgy 33-year-old, known for wearing designer T-shirts, became an icon of a dynamic "New Japan" after a spurned attempt to buy a baseball team in 2004 and a rare takeover battle with a giant media group last year made him a household name.

Bank of Japan Assistant Governor Eiji Hirano told a conference in London that the Livedoor case was possibly scandalous, but "nonetheless it symbolises that the trend where new wave replaces old system is on the rise."

Prime Minister Junichiro Koizumi even tapped Horie to run for parliament as a poster boy for reform in a lower house election last September, although he lost.

"If the law was broken, it is only natural to respond strictly," Koizumi told reporters yesterday.

Also arrested were Chief Financial Officer Ryoji Miyauchi and directors Fumito Okamoto and Osanari Nakamura.

Livedoor issued a statement late yesterday confirming that Horie and the three others were arrested.

"We will quickly decide how to run our board to avoid any impact on our business," it said.

College dropout Horie set up Livedoor predecessor company Livin' On the Edge a decade ago with just US$50,000 in capital.

Adopting an aggressive acquisition strategy and promoting himself as a brand symbol, he parlayed that into market capital of more than US$6 billion just before last week's raid.

Investors' fears that other IT firms might also have fudged their books sparked a flood of sell orders on the Tokyo Stock Exchange last week, causing prices to plunge and swamping the bourse's computer system.

Department store of crime?

Horie has many fans. "He and his way of doing things represented our generation," one young Japanese man with the dyed brown hair typical of his age group told a TV broadcaster.

But his flamboyant lifestyle he drives a Ferrari and owns a private jet and his unabashed pursuit of wealth had drawn critics even before the raid.

Some saw the investigation as a reprisal from the "Old Japan" establishment at which Horie had thumbed his nose.

"He went too far," one middle-aged man said on TV. "Real business grows by hard work and sweat. Money games are an illusion."

The Tokyo Stock Exchange said late yesterday it had moved Livedoor's shares to a monitoring list, bringing the firm one step closer to a possible delisting.

The stock has lost about 64 percent, or US$4 billion, in value since the raid on its headquarters a week ago. Its shares were flooded with sell orders again yesterday and ended down by their daily 80-yen limit at 256 yen, a level that KBC Securities has calculated as a worst-case scenario break-up value if the group had to be sold off.

At that price the company is valued at about US$2.3 billion.

"The collapse of 'The Department Store of Crime' Livedoor is drawing nearer," Daiwa Institute of Research said in a research note before the arrests. "Talk in the market about Livedoor going bankrupt or being broken up and sold is strong."

Livedoor's portal, www.livedoor.co.jp, is one of Japan's most popular websites, but the group has a portfolio of nearly 50 Internet-related businesses ranging from consulting and software companies to network management, e-commerce and e-finance firms.

Analysts said, though, that the possible demise of Livedoor itself would have little economic impact "virtually zero," said a Tokyo-based analyst who declined to be named.

Japan's benchmark stock index fell more than 2 per cent yesterday amid continuing investor jitters over Livedoor. The Nikkei 225 lost 336.04 points, or 2.14 per cent, to close at 15,360.65 points. The drop brings the benchmark index's decline to 6.7 per cent since the start of last week, when public prosecutors first raided the offices of Livedoor.

The Tokyo Stock Exchange yesterday said it had expanded tradition capacity over the weekend to 5 million transactions daily, up from 4.5 million. A flood of sell orders last Wednesday forced the exchange to shut down early out of concern that its computer system could not handle the trades.

Still, the exchange continued to delay the start of its afternoon session by 30 minutes, as it had Thursday and Friday. The bourse said it would also shut down trading if the number of transactions hit 4.5 million.

Source: China Daily