Former Livedoor Co. President Takafumi Horie will plead not guilty to securities law violations, his lawyers told the Tokyo District Court during pretrial proceedings Wednesday.

“Horie had approval for all business operations from certified public accountants and other specialists, and was convinced he was operating within the bounds of the law,” lawyer Yasuyuki Takai said.

While the founder of the Internet firm does not dispute the external facts concerning his company’s stock transactions and flow of funds, Takai said, he was not aware the information under dispute was fraudulent.

The closed-door meeting was held to sort out the issues for the trial and arrange its schedule. Horie himself did not attend the meeting.

Presiding Judge Toshiyuki Kosaka and two other judges reviewed Horie’s plea, along with three prosecutors and two of Horie’s lawyers.

The prosecutors will submit their evidence on June 7. The trial is expected to begin as early as mid-July, and a ruling is expected by year’s end, court sources said.

Horie and four other Livedoor executives, as well as the once high-flying company itself, are accused of inflating financial figures to make it appear the Livedoor group made a pretax profit of 5 billion yen for the year through September 2004, instead of a pretax loss of some 300 million yen, which prosecutors say is the true figure.

The four, including former Livedoor Chief Financial Officer Ryoji Miyauchi and former Livedoor Representative Director Fumito Kumagai, as well as two accountants, Motoshi Kobayashi and Taishin Hisano, are expected to plead guilty when their trial opens May 26.

All except Kumagai also stand accused of spreading false financial information in 2004 about the takeover of a publisher by Livedoor Marketing Co., which was then known as ValueClick Japan Inc.

On Monday, Horie’s lawyers gave the court their main questions about the prosecution’s evidence. They also called on the state to prove how Horie and other Livedoor executives allegedly decided to inflate company earnings through a complex scheme involving the sale of Livedoor stock.

Although the defense denies the scheme is illegal, they asked prosecutors to show evidence that Horie was involved in its planning.

Pretrial proceedings were adopted nationwide on Nov. 1 to speed up the infamously slow judicial system. The proceedings are used to let the defense and prosecution submit evidence and decide what evidence and testimony to admit in the trial. The court then closes its doors to any new evidence, except in exceptional cases, thereby reducing the number of sessions necessary.

The courts hope that speeding up the judicial process will help the public participate in sentencing those put on trial for major criminal cases, starting in May 2009.

This “lay judge” system is designed for cases where the defendant faces either a life sentence or the death penalty, but the court decided to apply the procedure in Horie’s case because it was of high public interest and better to speed it up, said a prosecutor not connected to Horie’s case but who asked not to be named.

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