CEO, top execs of Japanese portal face prosecution

Livedoor is verging on collapse after its founder and others are arrested on charges of securities fraud.

A Japanese Internet empire is on the verge of collapse after its founder and other top executives were arrested on charges of securities fraud.

Japanese prosecutors on Monday night arrested Takafumi Horie, the founder and CEO of the Internet portal Livedoor and other Net-related businesses, and three other top executives on charges of securities violations.

A week ago, the company was raided by the Tokyo district prosecutor's office over suspicion that it had spread false information about its stock.

Media reports in Japan said the company was accused of issuing a false press release to drive up the share price of a marketing subsidiary. Since then, top executives have been investigated for allegedly illegally beefing up the company's earnings through dubious mergers and acquisitions and through related manipulations.

The news of the raid prompted an avalanche of sell orders for shares of Livedoor and its subsidiaries, once the darlings of Japan's independent investors. The sell-off nearly brought down the trading systems of the Tokyo Stock Exchange last week. The market value of Livedoor and its subsidiaries was more than US$6 billion just before the raid but quickly fell to nearly one-third of that value.

Horie, a defiant thirty-something, started his company when he was at the prestigious University of Tokyo. He quickly became a household name two years ago after his failed hostile-takeover bid for a professional baseball team. Like Donald Trump, he often appeared on TV shows to promote himself and his interests, and he expanded his business by buying up companies in the style of Barry Diller.

Last year, Horie boldly attempted a takeover of Nippon Broadcasting Company, the parent company of Fuji-Television, one of the top-rated TV networks, which is more than 10 times bigger than Livedoor in terms of revenue. Horie's tactic--a controversial one that exploited a loophole in Japanese stock regulations--forced authorities to revamp related laws. But Horie's company eventually did succeed in acquiring a majority stake in Nippon Broadcasting and managed to forge a partnership with Fuji-Television.

Horie's abrasive style and his wealth--he lives in a condo in the posh Roppongi district and drives a Ferrari--made him a media darling. He is enormously popular among young people, who tend to view him as hero who resists what is sometimes described as a suffocating social environment in Japan.

Even though his words and behavior irked some in the establishment, Horie's celebrity has taken him far, and even the ruling Liberal Democratic Party nearly endorsed him as its formal candidate in the national election held last summer.

Takashi Betsui of CNET Japan reported from Tokyo.

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