Japan's old-guard criticises Horie's 'get-rich-quick' schemes

The career of one of Japan's most remarkable - and controversial - modern businessmen lay in tatters this week with the arrest of Livedoor's flamboyant president Takafumi Horie as the Tokyo Stock Exchange (TSE) prepared for a possible delisting.

Livedoor dismissed Horie as president and representative director on Tuesday, a day after he and other senior executives were arrested on suspicion of breaking securities laws.

The move came as the Tokyo Stock Exchange came a step closer to delisting Livedoor, the company he founded, and announced an unprecedented step to restrict trading in the stock, which has plunged on a flood of sell orders since the probe emerged.

The arrest followed a weeklong investigation by Tokyo prosecutors into allegations of financial fraud and stock price manipulation by the internet and financial services company, which sparked chaos in Japan's stock markets last week.

Once worth over $6 billion (€4.88 billion), Livedoor has lost 80 per cent of its share value since investigators raided its offices last week. Many market observers now believe the firm will be broken up or go bankrupt.

Japan's Fuji Television Network, the second-biggest shareholder in Livedoor, said yesterday that it would hold top-level talks at the request of the troubled internet company's new president, Kozo Hiramatsu, 60, who replaced Horie on Tuesday.

Japanese media reported earlier that Fuji TV, which took a 12.75 per cent stake in Livedoor last year, is considering options to help Livedoor rebuild, including a possible buyout.

The TSE added to the firm's woes with an announcement that it was putting Livedoor and subsidiary Livedoor Marketing on monitoring status, often a prelude to delisting. The exchange said that the firm had so far failed to clear up suspicions that it had deceived investors.

Prosecutors waited until the end of the trading day before taking Mr Horie into custody on Monday, along with three other executives, including the firm's financial chief, Ryoji Miyauchi, who was questioned late last week.

Mr Miyauchi is believed to have testified that his boss did not know the details of a Livedoor takeover deal involving a publishing firm that it apparently already owned. The company is accused of using the deal to inflate the stock price of the publisher, and of concealing losses from investors. Mr Horie, who rapidly rose to fame after a series of bold deals that shocked the Japanese business world, has repeatedly denied the allegations in a blog he wrote every day from his besieged office in central Tokyo, saying he has "no recollection" of any of the allegations.

On Sunday, he filed a rambling letter to his thousands of fans, accusing the press of orchestrating the campaign against him.

"Anything is possible in the mass media, isn't it . . . There are so many fabricated articles that I cannot be bothered to counter-argue . . . I am being accused of something I didn't do."

Japan's business old guard added to Mr Horie's misery with interviews slamming what one commentator called his "get-rich-quick" schemes. The head of Japan's biggest lobby, Hiroshi Okuda, said such an approach "lacks morality and ethics".

With charges yet to be filed, nobody is writing off a man who, at 33, had built one of the most successful new firms in the country, but few are willing to bet that Mr Horie will bounce back.

The wait is now on to see whether he was just one rotten apple in Japan's new economy, or whether he is the harbinger of problems to come. The prime minister, Junichiro Koizumi, has been forced to defend accusations that the neo-liberal policies he has championed since coming to office in 2001 may have created the conditions for more Livedoor's. "Any illegal acts must be handled harshly," said Mr Koizumi.