The Tokyo District Court convicted two accountants Friday of knowingly certifying cooked Livedoor Co. financial reports, finding them negligent in their duty to provide accurate information to investors.

In the latest in a series of guilty verdicts to result from the accounting fraud that has engulfed Livedoor, Taishin Hisano, 42, of the now defunct Yokohama-based auditing firm Koyo & Co, was handed 10 months in prison. Motoshi Kobayashi, 52, a former Koyo employee, was given a suspended one-year term. Hisano appealed the verdict.

Later in the day, the court also fined Livedoor Co., an Internet service provider, 280 million yen, the largest penalty ever levied for Securities Exchange Law violations. media innovation Co., formerly Livedoor Marketing Co., was fined 40 million yen.

Livedoor President Kozo Hiramatsu held a press conference later Friday in Tokyo to say that Livedoor would not appeal its conviction. He also said the firm may sue founder Takafumi Horie and the other former executives who were convicted for falsifying the company’s financial reports.

According to the Japanese Institute of Certified Public Accountants, Hisano is the first certified accountant in Japan to receive a prison sentence, unsuspended, for violating securities laws.

Previously, three accountants enmeshed in the Kanebo Ltd. accounting scam were all convicted, but given suspended terms. The household products maker had inflated its earnings by about 80 billion yen.

Hisano and Kobayashi, the court agreed, turned a blind eye to Livedoor’s falsified books for the 2004 business year for fear of losing a major client for their auditing house.

Hisano signed the padded financial statement, while Kobayashi, who was no longer with Koyo, remained in close contact and discussed the case with Hisano.

“Although the scale of the fraud was not as large as similar cases in the past, the consequences of this case were grave,” presiding Judge Toshiyuki Kosaka said.

“The accountants could have stopped Livedoor from deceiving its investors and stopped them from expanding their business at the expense of the investors, but instead the two supported their activity. Their responsibility is extremely grave.”

Prosecutors had demanded 18-month prison terms for both accountants, who had pleaded not guilty.

The court said it accepted the evidence presented by prosecutors, which backed up the contents of several e-mails exchanged by Hisano and Kobayashi.

In handing down the sentences, Kosaka said the accountants neglected their duty to provide accurate information about the firm, which shareholders rely on.

“We solemnly accept the court’s decision, and would like to express our deepest apologies to our customers and other related parties,” Hiramatsu said.

He said Livedoor would remain in full compliance with the law and strengthen its corporate governance. In the ruling, Judge Kosaka acknowledged he took these things into account when calculating Livedoor’s 280 million yen fine.

Prosecutors had demanded a 300 million yen fine.

Hiramatsu said an outside committee is looking into the entire incident and Livedoor will decide whether to sue Horie and the others after the report comes out in April.

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