The actual prison time handed down Thursday to flamboyant fund manager Yoshiaki Murakami and to Livedoor Co. founder Takafumi Horie in March appear to signal that white collar criminals now face much harsher punishments, some legal analysts say.
Courts have routinely handed down suspended sentences for corporate crimes. However, Murakami was sentenced to two years for insider trading and Horie got 2 1/2 years for accounting fraud.
Kenichi Osugi, a professor of securities exchange law at Chuo University Law School, who agreed with the decision to send Murakami to prison, predicted that from now on white-collar criminals will face stricter punishments.
“The ruling on Horie has changed the trend” of suspended sentences, Osugi said.
The court also ordered Murakami to pay a 3 million yen fine and forfeit 1.15 billion yen to cover the profits the court estimated he had made in 2004 and 2005 on insider trading in shares of radio broadcaster Nippon Broadcasting System Inc.
The court also ordered now-defunct MAC Asset Management Inc., the investment consulting firm formerly owned by Murakami, to pay a fine of 300 million yen for its involvement.
The court said MAC Asset made a profit of 3 billion yen by selling 5 million of its NBS shares after Livedoor announced on Feb. 8, 2005, that it had acquired a 35 percent stake in NBS.
Minoru Nomura, a criminal law professor at Waseda University, said the penalties to Murakami and his fund are appropriate because the court ruled that Murakami made huge profits by enticing Horie and other former Livedoor executives to purchase NBS shares.
In addition, Nomura said, Murakami’s admission that his purchase of NBS shares could be interpreted as insider trading was a major factor in his sentence.
In June 2006, just prior to his arrest, Murakami held a news conference in Tokyo and admitted he knew Livedoor would acquire the NBS shares before the transaction was announced. He also said the same thing under questioning by prosecutors. However, he pleaded not guilty to the charges.
“It is understandable that the court took his confessions (to the media and prosecutors) as evidence because he did this voluntarily,” Nomura said.
Nomura said the ruling was a warning to investment funds that they must act ethically in the stock market.
“The public has come to look severely on crimes such as insider trading . . . and want to ensure that the stock market operates fairly,” he said.
Chuo University’s Osugi agreed with prison time for white-collar crimes but said the court punished Murakami too harshly. He said the court was heavily influenced by the public outrage over the defendant’s behavior.
“Corporate executives who engaged in insider trading cannot avoid a prison term.” he said, noting a one-year term would have been more appropriate.
He disagreed with the ruling that Murakami had unfairly taken advantage of his position as an influential shareholder of NBS to pursue huge profits, something ordinary investors cannot do.
“I think the two-year prison sentence was excessive, based on this” criticism, he said.
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