• SHARE

Former Livedoor Co. President Takafumi Horie and four others, as well as the company itself, were charged Tuesday with falsifying the company’s financial statements for the business year through September 2004.

They stand accused of inflating Livedoor’s financial figures to make it appear the Internet services firm had a group pretax profit of 5 billion yen for the period when it actually had a pretax loss of some 300 million yen.

Prosecutors believe Horie played a leading role in padding the financial statement in an attempt to raise the value of Livedoor’s stock.

They said their investigation into the flow of shady funds to Livedoor is not over yet, as they believe gains on sales of new Livedoor shares, issued for corporate takeovers through stock-swap deals, were funneled to the company through such methods as using investment partnerships and overseas accounts.

Tuesday’s indictments come on the heels of the decision Monday by the Tokyo Stock Exchange to delist Livedoor on April 14, after the Securities and Exchange Surveillance Commission filed a criminal complaint against the five and the once high-flying firm.

The market value of the firm has fallen 90 percent over the last two months since the Tokyo District Public Prosecutor’s Office raided Livedoor’s offices.

Horie has denied any wrongdoing during questioning by prosecutors since he was first arrested on separate allegations on Jan. 23, according to prosecution sources.

The four others charged with violating the Securities and Exchange Law are Livedoor board member Fumito Kumagai, former Livedoor Chief Financial Officer Ryoji Miyauchi, former Livedoor Director and Livedoor Marketing Co. President Fumito Okamoto, and former Livedoor board member and Livedoor Finance Co. President Osanari Nakamura.

Horie, Miyauchi, Okamoto and Nakamura were first charged on Feb. 13, for allegedly violating the securities law by disseminating false information in 2004 about a takeover of a publisher by Livedoor Marketing, then known as ValueClick Japan Inc., and for publishing fabricated figures for the group company in November of that year.

On Feb. 22, the Tokyo District Public Prosecutor’s Office arrested Kumagai and served fresh arrest warrants on Horie and the other three, all of whom remain in custody, for allegedly manipulating the parent company’s financial results.

Miyauchi and other senior Livedoor officials have owned up to the misdeeds and said Horie was aware of them, according to investigators. Livedoor said Tuesday it has asked the Tokyo District Court to select a provisional director as Kumagai has tendered his resignation.

The provisional director will stay on the board until a successor to Kumagai is selected, Livedoor said.

The firm made the request to the court Monday following Kumagai’s submission of a letter of resignation.

He assumed the post of representative director in January following the first round of arrests, but he himself was arrested the following month.

The right to represent the company was transferred to Noriyuki Yamazaki, but Kumagai has stayed on as a board director to enable the company to make managerial decisions, partly because the Commercial Code mandates that a stock company must have at least three board directors.

If the court refuses to authorize a provisional director, Kumagai will stay on the board, Livedoor said.

The Tokyo-based Internet company will convene an extraordinary shareholders’ meeting in mid-June to approve a motion to replace all three existing board members with five new directors, including President Kozo Hiramatsu and two people from outside the company.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW