Former dotcom mogul Takafumi Horie yesterday was found guilty of securities laws violations and sentenced to two-and-a-half years in prison in a case that has come to symbolize the challenges Japan faces in policing rising startups.
The defense team appealed the ruling shortly after the verdict. Horie, who pleaded not guilty, was also granted bail at ¥500 million (US$4.3 million), a court official said, speaking on customary condition of anonymity.
During the trial, which began last September and has drawn intense Japanese media coverage, Horie had said he had been framed and accused prosecutors of having targeted him for standing out too much with his brash, unconventional business style.
Chief Judge Toshiyuki Kosaka said Horie masterminded an elaborate network of decoy investment funds that were "established for the purpose of evading the law" and to "manipulate Livedoor's accounting."
"At that point, the prosecutors case was proven," he said in handing down the ruling.
Prosecutors had demanded a four-year prison term for the 34-year-old founder and former head of Internet services firm Livedoor Co, which Horie guided from unknown startup to household name.
Nearly all criminal trials in Japan end with guilty verdicts, but executives charged with such wrongdoing generally get a suspended sentence and avoid prison.
At the end of his nearly two-hour statement, the judge had kind words for Horie.
"Although you may have been found guilty, it doesn't mean that everything about you has been condemned," Kosaka said.
He told Horie he had received a letter from "a parent with a handicapped child" who was inspired by Horie's dreams and had bought Livedoor stock and still has them.
"I want you to make up for what you've done and start your life anew," Kosaka said.
Horie, dressed in a dark suit and tie, sat passively through most of the session, at times shuffling through papers on his desk.
His chief lawyer, Yasuyuki Takai, said he feared the verdict would squelch young people's drive to take up challenges.
"People who take up new challenges have no choice but to challenge legal ambiguities," Takai said at a news conference at the courthouse.
He said the case was based on ambiguous evidence and the testimony of two former Livedoor executives who have already pleaded guilty to similar charges and are being used as key witnesses against their former boss and friend.
The two key prosecution witnesses, including former chief financial officer Ryoji Miyauchi, are being tried in a separate trial on charges of securities laws violations. A ruling is scheduled for that case on Thursday.
"I cannot understand why there is a prison sentence," Takai said. "Regrettably, my disillusionment with the Japanese criminal justice system has only gotten worse."
Horie had drawn widespread media attention here as an outspoken millionaire challenging this nation's corporate culture long been dominated by big-name companies that conducted business through a cozy network of group-linked companies.
Horie was known for his cocky flamboyance that stood out among drab, old-fashioned executives, and fascinated the public with his flashy buyout attempts of a professional baseball club and a media conglomerate.
Some experts say companies like Livedoor that made aggressive acquisitions were just beginning to emerge, and Japan still lacked clearly defined laws to police such moves.
Horie tumbled from stardom when prosecutors raided his company last year and then arrested him. He was kept incarcerated for three months, but he did not sign a confession as most suspects tend to do in Japan, often to win lighter sentences.
Some Livedoor shareholders were pleased by the verdict, saying it recognized the financial damages they suffered because of the fraudulent accounting.
"I am little surprised because the ruling was harsher than I expected. I think the court judged carefully just how large the damage was to the shareholders," Ichiro Shimizu, 63, a former stockholder, told national broadcaster NHK.
Livedoor, which operated an Internet portal and offered Web-related services, drew a large number of individual investors, partly because of Horie's fame. Those investors, many of them amateurs at the stock market, took big losses when Livedoor shares nosedived after Horie's arrest.
About 3,600 individual investors have sued Horie and Livedoor for damages, saying they were duped to buy falsely valued shares.
Chohei Yonekawa, representing a group of investors, said yesterday's ruling will help their case.
"It shows guilt," he said. "It is proper the verdict includes a prison term."
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