Prosecutors are getting ready to file criminal charges against accountants who did work for Livedoor Co. as part of their investigation into the Internet and financial services firm’s alleged accounting fraud in 2004, prosecution sources said.

Investigators suspect that certified accountants from auditing firm Koyo & Co. in Yokohama approved a Livedoor earnings report for the business year ended September 2004, despite knowing the company was acting illegally.

The accountants have admitted to their involvement in the alleged accounting fraud during questioning, the sources said.

In the earnings report, Livedoor allegedly counted profits it gained from selling shares issued to acquire other companies via share swaps as sales instead of capital, which is a violation of the Securities and Exchange Law.

The prosecutors indicted former Livedoor President Takafumi Horie and four former Livedoor executives Tuesday on charges of falsifying the report.

The five, and the company itself, are accused of inflating Livedoor’s financial figures to make it appear that Livedoor had a group pretax profit of 5 billion yen in the period, although it actually had a pretax loss of some 300 million yen.

Prosecutors claim former Livedoor Chief Financial Officer Ryoji Miyauchi and Livedoor Director Fumito Kumagai hatched a plot to inflate the earnings figures. The prosecutors also believe Horie gave his consent to the plan at some point.

Horie has been in custody since he was served his first arrest warrant on Jan. 23.

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