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The Tokyo District Court sentenced Ryoji Miyauchi, former Livedoor Co. chief financial officer, to 20 months in prison Thursday for falsifying financial statements at the Internet firm but let three other executives walk away with suspended terms.

The court gave Fumito Okamoto, 39, former Livedoor director and president of Livedoor Marketing Co., and Osanari Nakamura, 39, former president of Livedoor Finance Co., suspended 18-month sentences, and former Livedoor Co. representative Fumito Kumagai, 29, a suspended one-year sentence for conspiring with Miyauchi, 39, to report a business 2003 pretax profit of 5 billion yen, when the firm had actually incurred a 300 million yen loss.

The ruling came just six days after Livedoor founder Takafumi Horie was given a 2 1/2-year prison term by the same court.

The court said the four men used dummy investment companies to log proceeds from sales of Livedoor stocks as its own earnings.

Miyauchi, Okamoto and Nakamura were also found guilty of padding sales at Livedoor affiliate ValueClick Japan Inc. — which became Livedoor Marketing Co. and is now media innovation Co. — and manipulating the market by spreading false information about the firm in 2004 to boost its share price.

In handing down the suspended sentences to Okamoto, Nakamura and Kumagai, presiding Judge Toshiyuki Kosaka said they had confessed to the crimes and had cooperated with prosecutors as well as showing remorse for what they did and apologizing to Livedoor’s employees and their families.

Miyauchi also pleaded guilty and testified in court against his boss. However, Kosaka said he was being sent to prison because he bore more responsibility than the three other executives for his part as chief financial officer and was most to blame after his former boss for the crimes.

Kosaka said Miyauchi was “deeply involved in the planning and ordering other executives to carry out the misdeeds,” and refused to listen to the firm’s certified accountants from the now-defunct Koyo & Co., who cautioned him against padding Livedoor earnings.

The court claimed the four men’s actions damaged the fairness of the stock market.

“Their crimes shook the foundations of” the bourse, Kosaka said.

When the judge asked him if he wanted to say anything before the ruling was handed down, Miyauchi, dressed in charcoal gray suit and brown tie, said that given the chance, he would like to do something for the people who had suffered.

He showed no emotion when the sentence was read but his lawyers immediately filed an appeal and the court later released him on 80 million yen bail.

Horie pleaded not guilty in his trial, arguing that he was never told it was illegal to report proceeds from stock sales as profit and that Miyauchi played the leading role in the fraud.

Prosecutors had asked for a four-year prison sentence for Horie, 2 1/2 years for Miyauchi and 1 1/2 years each for Okamoto, Nakamura and Kumagai.

After the ruling was handed down, individual investors in Livedoor who suffered huge losses after the firm’s share price plunged on the news of a probe into the firm’s finances urged the former executives to compensate them for what they lost.

“If (the four executives) have admitted their misdeeds, I think they should pay compensation. It is the only way for them to show their remorse,” said Iwao Abe, 61, one of 3,244 plaintiffs who filed a combined 18.7 billion yen damages lawsuit against all five convicted men and other former Livedoor executives.

Chohei Yonekawa, a lawyer for the investors, said it was unfortunate Okamoto, Nakamura and Kumagai only received suspended sentences but added the prison term for Miyauchi was fitting, serving as a reminder that corporate executives who try to deceive investors and the market will be punished harshly.

Under Horie, Livedoor expanded rapidly in early 2000s through a series of mergers and acquisitions. In January 2006, prosecutors raided Livedoor offices in an unusually surprise move that sent Tokyo stocks into a nosedive, and Horie and Miyauchi were later arrested. In April, the Tokyo Stock Exchange delisted Livedoor from the Mothers market for startups.

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