• The Associated Press


A major witness in the trial of Internet maverick Takafumi Horie contradicted his earlier statements Wednesday and testified that he believes the entrepreneur didn’t know about the dubious dealings he is charged with.

Ryoji Miyauchi, former chief financial officer of startup Livedoor Co., made the comments in one of the biggest trials Japan has had in years.

A hush fell over the Tokyo District Court when Miyauchi, in response to questioning by prosecutors, said Horie told him he didn’t know about a scheme that used fabricated sales to inflate earnings to gain illicit cash from stock swaps.

“He really didn’t know. He thought he really didn’t know,” Miyauchi said of Horie.

Horie, 33, who plummeted from celebrity status after his arrest in January, has pleaded not guilty to charges of securities laws violations. He denies having masterminded the scheme, and says the dealings were legal or contained minor errors.

Miyauchi has been the key witness linking Horie, the founder of Livedoor, to the dealings, which prosecutors say used dummy companies and doctored earnings reports.

How much Horie knew about the dealings is the key question in the trial, which began Sept. 4.

In earlier testimony, Miyauchi said he thought that conversations he and others had with Horie meant the entrepreneur was instructing him to falsify earnings.

When prosecutors on Wednesday pointed out to Miyauchi that he was contradicting his earlier comments, Miyauchi responded: “It was our belief that he knew. Maybe he forgot, or maybe what he remembered changed.”

Miyauchi, who has pleaded guilty to securities violations, told the court earlier that Livedoor officials explained the plans to Horie in meetings, and e-mail reports with figures about inflated earnings had been sent to him.

Before his arrest, Horie was praised as the leader of a new generation of dot-com entrepreneurs, and his trial has drawn widespread media attention.

The trial is also highly unusual because most defendants, especially in cases about earnings misstatements, plead guilty to win a lighter sentence and avoid a prison term.

Miyauchi hasn’t said Horie concocted the alleged scam. Like previous witnesses, Miyauchi told the court that Hideaki Noguchi, another Livedoor executive, had engineered and proposed the scheme. Noguchi died in what police said was a suicide after the Livedoor investigation surfaced this year.

Miyauchi has also testified that he himself came up with parts of the scheme to inflate earnings.

The defense says Horie lacked the accounting acumen to concoct the plot alleged by prosecutors and was too busy with publicity campaigns for Livedoor.

He has sometimes frowned at Miyauchi’s remarks but grinned when Miyauchi said Horie didn’t know about the scheme.

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