Former Internet mogul Takafumi Horie pleaded not guilty yesterday at the opening of a trial highlighting Japan's efforts to grapple with aggressive business tactics and define the legal boundaries for innovative stock trading.
Horie, 33, brash founder and former president of Internet startup Livedoor Co faced charges of securities laws violations in falsifying earnings data to inflate stock prices.
Horie entered the packed courtroom in a dark suit and blue necktie, in stark contrast to the trademark T-shirts he habitually sported before his arrest in youthful defiance of corporate Japan's old guard.
He sat expressionless until denying the charges, then sat down with a broad smile. The hearing at the Tokyo District Court was his first public appearance since his release on bail from Tokyo Detention Center in April.
"I did not do anything of the kind or instruct such things," Horie said, adding that he felt "offended" by the charges.
Prosecutors have said Horie and other Livedoor executives used dubious methods to buy up other companies, set up "dummy" companies to hide losses and jack up the capital value of their group companies.
Livedoor is suspected of pretending to have an affiliate acquire a company that was already under its control and selling stock in that company to doctor its books, prosecutors say.
Key to the trial is how much Horie knew about such antics and whether he was aware of wrongdoing or if he had conspired with the other executives to fabricate results, as prosecutors contend.
In a statement, prosecutors listed Horie's alleged crimes in great detail, arguing Livedoor's string of stock swaps and sale of own stocks to falsify earnings were all conducted "under Horie's instructions."
Defense lawyer Yasuyuki Takai said yesterday that the charges were completely ungrounded.
"The arguments of the prosecutors collapse on their own," he told the court. "The prosecutors are portraying acts that are totally not criminal as though they are great crimes."
Most Japanese trials end in guilty verdicts, and Horie -- in keeping with his unorthodox image -- has been extremely unusual in sticking to his assertion of innocence. The Japanese police and incarceration system are infamous for coaxing confessions out of those in custody in return for promises of leniency.
If convicted, Horie faces a maximum penalty of five years in prison or ¥5 million (US$42,000) in fines, or both.
Local media were fixated yesterday by Horie's decision to wear a necktie. Takai said Horie was a bit rusty in fashioning the knot but wanted to don the tie in deference to the magnitude of the case.
The Livedoor scandal stirred loud criticism of the government for failing to adequately monitor securities transactions and other financial practices because Livedoor's repeated stock splits and aggressive takeovers had been widely known.
"What's in question is what's the ideal form for capitalism and the stock market," Fuji TV chairman Hisashi Hieda said ahead of the trial. "And today marks the beginning of the process to make judgment."
Parliament passed a bill in June to tighten oversight of investment funds amid calls for stricter and clearer rules governing the securities market, partly in response to the Livedoor scandal.
Wataru Okumura, a 64-year-old who lost 3 million yen (US$25,750; euro20,000) on Livedoor stock, came to watch the trial in court Monday.
While he said he is undecided on Horie's guilty, he echoed calls for more oversight.
"I have suffered a huge loss, and if people tell me it's my own individual responsibility, then I have a big problem with that," he said. "We need correct information about companies."
For many Japanese, however, Horie's legacy will remain his role as the ultimate outsider who challenged the status quo.
"It cheers me up to see him because he lives in his own world with self confidence. I don't see him as a criminal," said Yo Hashimoto, 24, a worker at a temporary employment agency.
"I don't care if Horie is innocent or guilty." Hashimoto said.
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