The Tokyo High Court rejected Livedoor Co. founder Takafumi Horie’s appeal Friday and upheld his 2 1/2-year prison term for falsifying financial statements and violating the Securities and Exchange Law, describing the defendant as “lacking dignity.”

The high court, upholding a rare unsuspended term for a white-collar offense, dismissed Horie’s claim that the penalty was unjustly heavy.

Horie’s lawyer, Yasuyuki Takai, said he immediately filed an appeal with the Supreme Court and requested bail for his client.

The 35-year-old IT prodigy, who transformed Internet startup Livedoor into a conglomerate, was found guilty of reporting a pretax profit of ¥5 billion for the business year through September 2004 instead of an actual loss of ¥300 million. The scam involved camouflaging the loss by reporting sales of Livedoor shares conducted through dummy companies as profit.

Horie was also convicted of spreading false information on the takeover of a publisher by Livedoor affiliate Livedoor Marketing, thus manipulating the market to raise Livedoor’s stock price.

The criminal acts “could not have taken place without the instructions and approval of the defendant,” presiding Judge Tetsuji Nagaoka said. The court rejected Horie’s claims and held that the defiant entrepreneur conspired with close associates to hatch illegal schemes. The testimony against Horie by former Livedoor executives was judged to be credible.

Horie “knowingly proceeded with the acts and conspired with his accomplices,” Nagaoka said, adding there were no rational grounds to suspend the prison term.

The lower court, in its March 2007 ruling, also deemed Horie the mastermind.

Horie did not attend his appeals trial, which began in February, and was absent from the dock Friday. Lawyer Takai said his client wanted to avoid the commotion that his appearance in court would have caused.

Takai told reporters the high court’s ruling was “utterly incomprehensible and regrettable,” and questioned whether the judges took the time to study the case at all.

The focus of the trial was on how the court would judge the degree of Horie’s involvement in the window-dressing scam.

Horie’s lawyers attempted to put the blame on other Livedoor executives, arguing that their client was not aware of the dummy companies and was unaccustomed to the accounting process.

In a message by Horie that was read out during a court session in April, the maverick regretted that his intentions to help develop the stock market had been judged illegal. The fact that the case drew distrust from investors “is beyond regret,” his letter said.

Prosecutors meanwhile said Horie’s ¥10 billion fortune would allow him to mastermind similar crimes in the future and thus he must go to prison.

White-collar criminals convicted of financial fraud usually plead guilty and get suspended terms in return.

Two notable cases include the Kanebo Ltd. window-dressing case, in which two executives were given suspended prison terms in March 2006 after colluding with auditors to cover up more than ¥160 billion in capital deficits in 2001 and 2002, and the financial statement falsification and insider trading case involving Kokudo Corp., in which real estate tycoon and former Seibu Railway Chairman Yoshiaki Tsutsumi was handed a suspended term in 2005.

Horie, however, defied the allegations and proclaimed his innocence, at times in tears, during the lower court proceedings.

But the court Friday said Horie had a “feeble sense of moral precept” and “lacked dignity.”

“There are no signs of remorse for the crimes he committed,” Judge Nagaoka said in convicting the tycoon.

Three of the four former Livedoor executives have had their suspended prison terms finalized. Ryoji Miyauchi, Horie’s right-hand man and Livedoor’s former chief financial officer who was given an unsuspended 20-month prison term, will be handed his high court ruling in September.

Horie became a media darling in 2004 when he tried to buy the Kintetsu Buffaloes baseball team and later launched a takeover bid for Nippon Broadcasting System Inc.

The acquisition attempt over the AM radio broadcaster threatened the Fuji Sankei media conglomerate, but the University of Tokyo dropout disregarded traditional Japanese business practices and utilized mergers and acquisitions, after-hours trading and stock splits to expand his business. Horie also made an unsuccessful run for a Lower House seat in 2005.

But Horie’s fall from grace started in January 2006, when prosecutors abruptly raided Livedoor, causing one of the worst single-day plunges on the Tokyo Stock Exchange. The raid, which came without the usual forewarning, triggered a plunge in Livedoor’s share price from around ¥700 to ¥90, before the company was eventually delisted.

Lawyer Takai said Horie is residing at his exclusive Roppongi Hills condo along with his personal manager. The tycoon enjoys an occasional round of golf, Takai said, and is reportedly investing in overseas projects, including space exploration and travel.

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