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Japan has been abuzz with the unusually harsh prison term handed to former Internet mogul Takafumi Horie — and the slap on the wrist given to scandal-tainted brokerage Nikko Cordial in another high-profile case of accounting fraud that, in monetary terms, was some eight times greater than Horie’s firm.

Horie, founder of Internet portal Livedoor Co., was sentenced to 2 1/2 years in prison Friday for violating securities laws and falsifying earnings. Four other former top executives at Livedoor have been arrested and put on trial. Their verdicts will be announced Thursday.

In contrast, no one at Nikko Cordial, which has admitted inflating profits for its previous two business years, has been charged.

Instead, Japan’s third-biggest securities company — which Citigroup Inc. aims to take over — was fined 500 million yen by the Financial Services Agency.

And while Livedoor’s stock was delisted last year, the Tokyo Stock Exchange decided last week not to remove Nikko Cordial’s shares — despite widespread speculation that they would be.

Such differences have the Japanese public raising questions about how evenly justice is meted out according to what has been described as the murky gray area Japan calls securities laws.

“What’s happening is unfair,” said Koetsu Aizawa, economics professor at Saitama University. “Slamming the little guy who stands out while letting big names go is what’s so despicable about Japan.”

The Livedoor saga will continue Thursday, when the Tokyo District Court will announce its verdict on four other former executives, including former Chief Financial Officer Ryoji Miyauchi, the chief prosecution witness against Horie.

Miyauchi has pleaded guilty, while others have acknowledged many of the charges.

Horie, who before his downfall was idolized as a pioneer of a new breed of entrepreneurs, has insisted he is innocent — and perhaps because of that he was punished more severely.

In Japan, executives convicted of securities laws violations almost always avoid prison terms, usually by confessing to win lighter punishment. Nearly all criminal trials here end in guilty verdicts, and a show of remorse, sincere or not, can help win lenience.

Prosecutors have demanded only a 2 1/2-year prison term for Miyauchi, who has pleaded guilty, compared with four years for Horie, who is appealing his verdict. Prosecutors are demanding just 1 1/2 years for the three other former executives.

Reflecting widespread opinion here, the popular TV Asahi show “Sunday Project” earlier this week raised questions about Horie’s verdict by listing the various ways Livedoor’s punishment differed from that given to Nikko Cordial.

The show’s host held up a graph comparing the treatment given to both companies and the amount of money involved.

Nikko Cordial is accused of falsifying more than 40 billion yen in profits, far greater than the 5 billion yen or so allegedly trumped up at Livedoor.

The brokerage admitted last year that it had improperly booked proceeds from derivatives trading to inflate earnings for the business years that ended in March 2005 and March 2006.

Livedoor meanwhile is accused of setting up several “dummy” funds to carry out stock swaps and buy shares of Livedoor and its subsidiaries to jack up earnings.

Both companies faced the same charges — falsifying earnings reports, which violates securities laws.

Financial Services Minister Yuji Yamamoto has defended its treatment of Nikko Cordial, reckoning “various factors” have to be taken into account before delisting a company. He also mentioned the record-setting fine, but did not elaborate on the various factors.

Nikko Cordial has declined comment on how its punishment is being perceived by the public relative to Livedoor’s, but has said it will do its utmost to strengthen corporate governance.

Some have suggested that Horie was punished more harshly because he had drawn disdain from Japan’s conservative old-guard business leaders for his cocky attitude, his trademark T-shirt and jeans, and Livedoor’s aggressive strategy of gobbling up smaller companies.

But Horie has repeatedly insisted on his innocence, noting he wasn’t given leeway to correct his company’s books, as other companies are, and found himself suddenly accused as a criminal.

“It’s hard to take,” he said on TV Asahi Sunday.

Michael Smitka, a researcher at Chiba University and an expert on the Japanese economy, said regulation of stock trading is still relatively untested in Japan, because companies previously raised funds from banks.

“As the economy changes over time, the sort of issues that we face keep shifting,” Smitka said, adding that the need for accounting services has skyrocketed in Japan.

“It’s certainly sending a signal to corporate management they need to think about keeping things pretty,” he said.

Citigroup, which owned 4.9 percent of Nikko Cordial at the end of 2006, is conducting a tender offer for the remaining shares through April 26 in a deal worth up to $13.35 billion. Last week, Citigroup raised its offer 26 percent to 1,700 yen a share after Nikko’s largest shareholders rejected the initial price as too low.

Aizawa, the Saitama University professor, said the charges against Nikko Cordial were serious enough for delisting. And he said he believes Nikko’s reputation was protected by the authorities to maintain the overall stability of the Japanese stock market.

Japan’s undermanned securities watchdog lacks investigative powers and is often unable to take proper action against corporate wrongdoing, he said.

“No matter what they say about how the Japanese stock market has modernized to be an entity for investors, it’s obvious that’s all lies,” Aizawa said.

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