Murakami given two-year sentence

NBS share buy ruled inside trade

by Jun Hongo

The Tokyo District Court sentenced fund manager Yoshiaki Murakami to two years in prison Thursday for using inside information obtained from Livedoor Co. to trade in shares of Nippon Broadcasting System Inc.

Murakami, 47, whose investment advisory firm MAC Asset Management Inc. profited by some 3 billion yen in the deal, claimed innocence throughout the nine-month trial.

His lawyers filed an appeal, and Murakami was freed on 700 million yen bail Thursday afternoon.

Presiding Judge Kunihiko Koma called the financier’s crime “a significant offense that was viciously conducted by a professional fund manager.” Murakami, the judge said, was involved in insider trading “behind the screen of public attention he gained as the foremost shareholder activist.”

The judge also ordered Murakami to pay a 3 million yen fine and levied an additional penalty amounting to 1.15 billion yen.

Murakami did not speak in court but issued a short statement afterward calling the verdict “unfair.” He had earlier voiced optimism that he would be acquitted.

The court ruled that Murakami violated the Securities and Exchange Law by trading in NBS shares in 2004 and 2005 with inside information obtained from Livedoor executives, who had informed him they would purchase a large share of the radio broadcaster.

Livedoor was headed at the time by Takafumi Horie, a now disgraced Internet startup icon who was sentenced to 2 1/2 years in prison by the same court in March on charges that included falsifying the company’s earnings reports.

Murakami and Livedoor executives discussed taking over NBS because the radio broadcaster was the largest stakeholder of Fuji Television Network Inc., the flagship of communications conglomerate Fuji Sankei group.

The court said Murakami was notified of Livedoor’s decision by Nov. 8, 2004, and had MAC Asset Management, the investment consulting firm then owned by himself and now run by MAC Asset Management Ltd. in Singapore, pay 9.95 billion yen for about 1.93 million NBS shares between Nov. 9, 2004, and Jan. 26, 2005.

MAC Asset made a profit of 3 billion yen by selling its NBS shares after Livedoor announced on Feb. 8, 2005, that it had acquired a 35 percent stake in the AM broadcaster, the court said.

“The unparalleled amount of profit was made by deceiving the general investors,” the judge stated, condemning Murakami’s crime for damaging trust in the stock market.

The court also convicted MAC Asset over its involvement in the wrongdoing and fined the firm 300 million yen.

The trial focused on two points: whether Murakami purchased NBS stocks based on inside information from Livedoor executives and whether the Internet startup had a realistic chance to take over NBS.

Although the disgraced financier admitted to reporters just prior to his arrest in June 2006 that he was aware of Livedoor’s intentions and that his subsequent purchase of NBS shares could be construed as insider trading, he reversed himself when the trial began in November on grounds that Livedoor’s ambition to takeover NBS did not seem feasible at the time.

Murakami, who claimed that owning up to the charges at first was an attempt to save other MAC Asset executives from being arrested, also asserted that his decision to purchase NBS shares was his own and not influenced by a third party.

But the judge rejected his counsel’s argument on grounds that evidence, including e-mail exchanged between Livedoor executives regarding NBS shares, confirmed the Internet startup’s genuine intention to purchase the radio broadcaster.

The court also ruled that Murakami’s sudden plea of innocence was exceedingly odd and the former bureaucrat showed no remorse by sticking to “absurd excuses.”

White-collar criminals have rarely been handed unsuspended prison terms, with Horie being a recent notable exception.

In demanding a three-year prison term, a fine of 3 million yen and a forfeit of 1.15 billion yen for Murakami, prosecutors had alleged in May that the financier lacked “even the minimum of ethics” in committing crimes designed to turn a huge profit for himself.

The 1.15 billion yen forfeit is the biggest-ever financial penalty for insider trading. During the trial, Horie had testified in Murakami’s defense, claiming his decision to acquire NBS shares was made “right before the actual purchase” in February 2005.

But Livedoor ex-Chief Financial Officer Ryoji Miyauchi testified that he personally told Murakami about Livedoor’s NBS takeover plans during the Nov. 8, 2004, meeting.

Murakami timeline

The following is a chronology of events related to Yoshiaki Murakami, convicted of insider trading in Nippon Broadcasting System Inc. shares:

July 2003 — The Murakami fund emerges as the second-biggest shareholder in Nippon Broadcasting. Murakami later raises the investment fund’s stake in the Tokyo-based radio station, making it the largest shareholder.

Sept. 15, 2004 — Murakami allegedly urges Internet and financial services firm Livedoor Co. to buy NBS shares in order to wield influence over the Fujisankei Communications Group.

Nov. 8 — Murakami allegedly obtains information from Livedoor’s top management that Livedoor plans to buy a large amount of NBS shares.

Nov. 9 — The Murakami fund starts buying additional Nippon Broadcasting shares, allegedly based on the tipoff from Livedoor.

Feb. 8, 2005 — Livedoor says it has acquired a 35 percent stake in NBS mainly through after-hours transactions. The Murakami fund is believed to have sold part of its stake to Livedoor.

June 5, 2006 — Prosecutors arrest Murakami on suspicion of insider trading. Murakami owns up to the charges.

Nov. 30 — Murakami retracts his earlier admission and pleads not guilty at the start of his Tokyo District Court trial.

March 20, 2007 — Former Livedoor President Takafumi Horie testifies in defense of Murakami, denying Livedoor gave insider information to the fund.

May 11 — Prosecutors demand a three-year prison term for Murakami in addition to a 3 million yen fine and a 1.15 billion yen surcharge.

July 19 — The Tokyo District Court sentences Murakami to two years in prison and imposes a record 1.15 billion yen surcharge for insider stock trading.