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Former Livedoor Co. Chief Financial Officer Ryoji Miyauchi told the Tokyo District Court on Tuesday that Livedoor founder Takafumi Horie played a key role when the Internet company decided whether to take over other firms.

“Horie took part in the decision-making process, because it was the Livedoor group that conducted corporate acquisitions,” Miyauchi, 38, told the court, where he is being tried along with three other former Livedoor executives and the company for accounting fraud.

The trial began May 26. The four men have pleaded guilty to falsifying the firm’s earnings figures for the business year to September 2004. Falsifying earnings is a violation of the Securities and Exchange Law.

The testimony from the man once considered Livedoor’s second in command could be used to show that Horie, 33, the former president, might have instructed other executives to engage in illegal activities. Horie, who has said he is innocent, will be tried separately, probably no earlier than September, according to sources.

Livedoor is accused of booking a false group pretax profit of 5 billion yen for the year to Sept. 30, 2004. It allegedly inflated an actual pretax loss of 300 million yen through such means as listing the proceeds from share sales.

Miyauchi told the court Tuesday he was involved in the fraud but was not second in command.

“I was not the No. 2 executive at Livedoor. I was in charge of financial transaction matters. I had jurisdiction over corporate acquisitions and other affairs,” he said.

Horie “had a strong desire to make his company No. 1 in Japan and then in the world in a short span of time. He frequently took advantage of corporate acquisition deals, as it was hard to post earnings and profits while expanding the corporate group.”

Miyauchi has cooperated with the Tokyo District Public Prosecutor’s Office. The information he has given prosecutors is central to their case against the four executives and the firm.

He confessed to committing fraud earlier this year, before being charged. Miyauchi revealed to the court that he was questioned 44 times by the special investigative squad of the prosecutor’s office after he was released on bail on March 17.

Horie also has been charged with taking part in the accounting fraud, based in part on Miyauchi’s testimony to prosecutors.

Miyauchi told the court that when Livedoor management said they wanted to book the sale of new shares it was planning to float for the year to Sept. 30, 2004, as genuine proceeds, “our accountants said booking it that way would be wrong, leading me to begin to think it was a bad thing to do.”

However, he and the other Livedoor managers “could not give up” following through with the falsification, the former executive said.

When asked about booking bogus sales to companies Livedoor was planning to take over as Livedoor’s sales, he said, “We deviated from the right path.”

Miyauchi has also reportedly provided prosecutors with key information to help them build a separate case against Yoshiaki Murakami, founder of the Murakami fund. The 46-year-old shareholder activist was charged with insider trading in June.

Miyauchi has told prosecutors that Murakami encouraged Livedoor in 2004 to buy up shares of Nippon Broadcasting System Inc. When Livedoor did decide to acquire a large stake in the radio broadcaster, it told Murakami before making the acquisition, the sources said.

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