TOKYO (Reuters) - Takafumi Horie, the 34-year-old Internet entrepreneur who rattled corporate Japan with his celebrity lifestyle and brash takeover bids, was found guilty and sentenced to 2-½ years in prison on Friday for his role in a securities fraud at his former company Livedoor.
The punishment contrasted with past sanctions meted out to Japanese executives convicted of white-collar crimes, who often receive suspended sentences after pleading guilty and showing remorse.
Experts said the ruling symbolised a new determination by regulators to clamp down on corporate misdeeds, though Horie’s defiant insistence on his innocence likely marked him for tougher treatment.
“I think this is a message that they have rules and are going to start enforcing them,” said Keith Henry, director of Asia Strategy, a consultancy that advises firms on policy and regulatory issues in Japan.
“If he had just sort of shut up and taken his knocks like a ‘good Japanese’, I don’t think he would have been punished as much.”
A dropout from the prestigious University of Tokyo who used savvy marketing and an aggressive string of acquisitions to build a $50,000 start-up into a conglomerate worth $6 billion (3 billion pounds) at its peak, Horie had called the charges “malicious” and blamed his chief financial officer for the accounting mess.
Prosecutors had sought a four-year jail term.
Horie, wearing a dark suit and grey tie, stood while the verdict was read then sat with a sombre expression while the Tokyo District Court presiding judge, Toshiyuki Kosaka, explained the verdict.
“This was an extremely malicious crime that damaged the impartiality of the securities market,” Kosaka said.
Horie is appealing the ruling and the court agreed to extend his bail during the process. He paid a new bond of 500 million yen (2.2 million pounds), a court spokesman said.
“I’m disappointed that our case wasn’t accepted. We’ll keep fighting in the appeal,” Horie said in a statement released through his lawyer.
The trial has drawn intense media attention in Japan, where opinions of the convention-flouting, Ferrari-driving Horie were divided even before his arrest.
Television networks reported the verdict from live feeds set up outside the courtroom. When Horie requested a short bathroom break, reporters scrambled outside to relay the news.
Horie’s audacious bid to buy an Osaka-based baseball team in 2004 and his takeover battle with a larger media group a year later won him fans but annoyed conservative business leaders.
“I liked him. When everyone else was wearing a suit, he had a T-shirt on,” said Michiko Hikosaka, a 25-year-old veterinarian. “But since he’s done something bad, now he has to pay for it.”
The Livedoor scandal even tainted top Japanese politicians. Former Prime Minister Junichiro Koizumi, another maverick, had tapped Horie to run in a 2005 national election as a poster boy for economic reform, though Horie failed to win a seat.
In court, Horie’s defence team attempted to portray him as a meek chief executive who relied so heavily on advisers that they came to dominate his company.
“I never studied accounting,” Horie testified in November. “A management book I read said to leave that to specialists, so that’s what I did.”
But his newfound humility clashed with the cocksure public persona who published a dozen advice books such as “How to Make 10 Billion Yen” and “The Easy Way to Build a Money-Making Company”.
Four other Livedoor executives including the CFO, Ryoji Miyauchi, have pleaded guilty in the case.
Horie must also contend with lawsuits from shareholders over the $5 billion in market value shed by Livedoor following his arrest, which sparked a share sell-off that swamped the Tokyo Stock Exchange’s computer system, keeping it on shortened trading hours for three months.
Livedoor lost its Tokyo Stock Exchange listing last April after its share price sank to just 94 yen (35 pence).
The trial centred on problems with Livedoor’s 2004 earnings.
Prosecutors charged that Horie pressured aides to inflate profits using gains from the sale of Livedoor stock held in Hong Kong-based investment funds and phoney sales to allied firms.
The funds were “set up for the purpose of evading the law,” presiding judge Kosaka said. “At that point, the prosecution’s case was proven.”
Additional reporting by Chisa Fujioka, George Nishiyama and Linda Sieg