Ground Floor: My favourite book of 2005 was The Insider by Piers Morgan, his account of his 10 years as editor of the Daily Mirror. I've never actually read the Mirror but, having raced through Morgan's diaries in less than two days, I regret not having flicked through it while he was at the helm, if only to have read first-hand some of the stories he talks about in his book.
But obviously it's just as well I didn't read the City Slickers share tipping column because (unlikely though it may have been) I might have been tempted to invest in some of the companies they mentioned. The two 'slickers', Anil Bhoyrul and James Hipwell, were found guilty last December of manipulating the UK stock market between August 1999 and February 2000. During that time they bought shares in 44 companies, all of which they tipped on the internet or in their column and all of which they sold at a profit.
It wasn't exactly the scam of the century, because they made less than £60,000 (€87,000) between them - Daily Mirror readers clearly not being big players in the stock market - but Anil, at any rate, reckoned the time had come to cut his losses and plead guilty to market manipulation. He was sentenced to 180 hours of community service. Without the plea, the judge told him that he would have been sent to jail. James Hipwell may face a jail sentence but he is currently undergoing treatment following a kidney transplant.
The judge did comment that there was a culture of tipping and share dealing in the Mirror office which was symptomatic of the 1990s. According to Bhoyrul even the canteen staff used to ask him what the next day's tip was going to be. Given that it was relatively low-grade stuff it might not have come to light except for the fact that the 'slickers' ran an article on Viglen Computers, owned by Sir Alan Sugar, and Piers Morgan turned out to have bought rather a lot of them the day before. Morgan insists that he hadn't seen the article before he bought the shares, but Bhoyrul disputes this. Although he was investigated by the UK Department of Trade and Industry, Morgan wasn't prosecuted, but the judge did comment on the lack of "appropriate leadership" for journalists at the newspaper.
But the Daily Mirror wasn't the only company where appropriate leadership went missing in the dotcom decade. Salomon Smith Barney gave Jack Grubman free rein as a telecom guru and Wall Street's highest paid analyst with influence over the entire sector - when Grubman spoke, stocks moved. But even Grubman's influence couldn't halt the implosion of the market he'd helped to create, although he only stopped recommending a stock called Global Crossing after the company filed for bankruptcy. Better management might have saved investors a lot of heartache.
But then sometimes the management itself doesn't know when to stop. Which is what may have happened with Takafumi Horie, founder of Livedoor, a Japanese internet and finance company. Young and brash (and not always liked by corporate Japan, which he called "a club of old men"), he built up an empire that was worth an estimated $8 billion (€6.5 billion) at its peak, and he was the toast of Japanese celebrity life. He wrote books on how to make a fortune and made an unsuccessful attempt to win a seat in parliament.
On Monday January 16th, though, the offices of Livedoor were raided by the Securities and Exchange Surveillance Commission on suspicion of securities law violations. Back in October 2004, Livedoor Marketing announced the takeover of a publishing company, Money Life, through a stock swap, although it actually controlled it already through an investment fund subsidiary. The ensuing share price rise is now being investigated and Horie was arrested on Monday.
The Nikkei, currently undergoing something of a renaissance, suffered its biggest fall since the terrorist attacks of September 11th, 2001, forcing the Tokyo Stock Exchange (TSE) to close early and shorten trading sessions because its system couldn't deal with the number of orders. Livedoor's share price dropped by the largest daily moves allowable under Nikkei rules.
Horie has denied breaking any market rules and any involvement in the suspect deal, although when someone protests their innocence by saying they "have no recollection of doing anything we are under suspicion for", you can't help wondering about the quality of the protestations.
Livedoor's chief financial officer and two other executives were also arrested. Tragically, the vice-president of HS Securities, a company that was linked to the corporate takeover deals, committed suicide last week.
It's hard to know whether corporate Japan wants Horie to be found innocent or guilty. There's a certain schadenfreude about the local coverage of his problems, but the truth is that Japan hasn't exactly been a model of corporate good behaviour in the past, and just because those crimes were committed by men in suits rather than men in T-shirts doesn't lessen their seriousness.
However most people are very concerned that confidence in the Japanese recovery will be dented by the Livedoor debacle and by the halt in trading on the TSE, which spooked them even more. The market has recovered somewhat, though faith in the exchange itself will take a bit longer to be restored. But faith in Horie might be gone forever.
