Internet Changes Everything

New Allegations Emerge Around Japan's Livedoor

The Epoch Times | New Allegations Emerge Around Japan's Livedoor

By Yukari Iwatani Kane
Reuters
Jan 20, 2006

Men watch an electronic share price display at the Tokyo Stock Exchange January 19, 2006 in Tokyo, Japan. An investigation into the Japanese Internet Portal Livedoor has thrown the Japanese stock market into chaos, and Livedoor's shares have gone down over 50%, or over $3 billion. (Koichi Kamoshida/Getty Images)
High-res image (594 x 406 px, 300 dpi)

TOKYO — Prosecutors were set to question top executives of Livedoor Co., the Japanese Internet portal under investigation for violating securities laws, Kyodo news agency said on Friday, as new allegations emerged.

Kyodo, quoting investigative sources, said prosecutors plan to question Livedoor's Chief Financial Officer Ryoji Miyauchi, director Fumito Kumagai and other officials later on Friday.

The Nihon Keizai newspaper and others, citing sources, said prosecutors believe Livedoor mishandled more acquisitions than they initially suspected as they stepped up their investigation.

The news capped a week that saw the apparent suicide of a key figure in the case, the resignation of a company director and a 50 percent plunge in the company's market value that threw the world's second-biggest stock exchange into chaos.

The investigation has put a spotlight on Japanese start-ups that have grown flamboyantly, mainly through aggressive acquisitions in defiance of traditional Japanese business practices that honour harmony and modesty.

Livedoor announced the resignation on Thursday of director Yoshiaki Yamada, an executive at Fuji Television Network Inc. Yamada had joined Livedoor's board two months ago after Fuji reluctantly took a stake in the Internet firm as part of a settlement in which Livedoor agreed to give up a bid to take over Fuji.

The prosecutors' case has been complicated by the apparent suicide of an executive with an investment firm believed to be involved in the transactions in question. The executive, a former confidant of Livedoor Chief Executive Takafumi Horie, was found dead on Wednesday after being questioned by investigators.

Livedoor is due to submit the findings of an internal investigation to the Tokyo Stock Exchange on Friday. The bourse could delist the stock, depending on the contents of the report.

Livedoor shares were hit with a glut of sell orders for the fourth straight day on Friday. The stock has now lost about 52 percent, or $3.3 billion, in value from its total market capitalisation of $6.3 billion before news of the investigation broke on Monday evening.

Fallout from the Livedoor investigation wreaked havoc on the Tokyo Stock Exchange this week, forcing the bourse to shorten its trading hours after investors flooded the market with sell orders and nearly overwhelmed its computer systems on Wednesday.

Total Picture Under Scrutiny

Investigators from the Tokyo District Prosecutors office and the Securities and Exchange Surveillance Commission raided the Internet company's offices late on Monday on suspicion that Livedoor had spread false information to investors.

Domestic media have said the Livedoor group issued new shares to "acquire" companies that were already under its control and then sold them in the market for a profit, which it then used to pad its earnings report.

"Each of the actions are within the boundaries of the law, but when you look at the entire picture the actions are questionable," said Takanobu Takehara, an attorney for Nishimura & Partners in Tokyo.

Takehara said the investigation would likely centre on whether Livedoor executives masterminded a plan to deceive the public for profit and how much control they had over the investment partnership they used in the transactions.

Hideaki Noguchi, who is believed to have committed suicide this week, was a vice president at H.S. Securities, which owned the investment partnership under scrutiny.

Noguchi was also formerly an executive at Livedoor's predecessor company, Livin' on the Edge Co.

Livedoor, known for its aggressive acquisition strategy, has grown rapidly to amass a broad portfolio of nearly 50 Internet-related businesses.

The company's portal site, www.livedoor.co.jp, is one of Japan's most popular Web sites, but its holdings range from consulting firms and software companies to network management, e-commerce and e-finance firms.

Livedoor has been in the spotlight over the last couple of years as Horie made plays to buy a baseball team, take over Fuji Television and run for parliament. All of the attempts failed.

January 20, 2006 at 04:46 PM in Japan | Permalink | TrackBack (161) | Top of page | Blog Home