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Things just keep getting worse for Livedoor. On Friday , it got the slammed with the largest fine ever in Japanese corporate history for securities laws violations. (another link) Two certified accountants were also convicted, and one of them got a prison sentence _ the first time an accoutant landed behind bars in Japan on a guilty verdict on such charges. Livedoor was a first for Japan in many ways, and so it makes sense that the justice that the company and its people are getting is also marking a first. About 3,600 individual investors are suing Livedoor and Horie for damages. Harsh judgments in criminal courts are a plus for civil cases. Fuji TV, which was once a major stakeholder in Livedoor, has said repeatedly it’s suing Livedoor for damages. And Livedoor’s new management is now talking about suing Horie.

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Miyauchi was not able to avert a prison term and was sentenced to 20 months in prison. The others got suspended sentences.
I did a story on how people are questioning the harsh treatment Horie is getting vs. Nikko Cordial. Another link. And an updated version of the story on the possibly double standard in Japanese justice. Some are even hinting the authorities are getting lenient because Citigroup is interested in taking over Nikko Cordial. Delisting Nikko Cordial would have saved money for Citigroup by making NC shares cheaper. But NC’s reputation would have been devastated. By not delisting, its reputation stays intact and you prevent an exodus of the best workers from Nikko, according to pundits. For the cynics, the message is: It pays to be big and powerful, and maybe American in Japan.

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Perhaps the Japanese court will hand down as harsh a verdict on the other executives at Livedoor as with Horie.
Japan’s court system doesn’t have plea-bargaining.
The judge in Horie’s case is saying that the evidence shows Miyauchi was the main man behind the schemes, allegedly used to inflate profits.
Then at least the logic would follow that it would make sense for Miyauchi to possibly end up with even a heavier sentence.
Soichiro Tawara’s news show on TV Asahi noted the lenient treatment Nikko Cordial was getting from the authorities vs. what happened with Livedoor.
Nikko wasn’t even delisted despite lots of Japanese media reports saying that it will _ making its stocks gyrate like mad all along (likely landing hefty profits for investment funds).
The show also pointed out, as have our AP stories on Livedoor, that past executives accused of inflating earnings didn’t get prison terms.
But the pundits on the TV show said part of the reason may be that Horie made millions off selling his stocks in Livedoor.
The verdict on Miyauchi and others is scheduled for March 22.

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I was one of the reporters rushing around March 16 to tell the world the verdict in the trial of Livedoor founder Takafumi Horie.
Since foreign media are assigned only two seats for some 10 news organizations that wish to get into the courtroom, we have to play a musical chairs version of reporting.
We get armbands from the ninth floor PR office that show to court security that we are indeed reporters. We pass each other the armbands like a relay racer.
The trial is attracting a great deal of attention. TV was an endless stream of Livedoor reporting. TV and still photo cameras aren’t allowed in Japanese courtrooms except for the first few minutes before the session starts. And so what we see (is Horie wearing a tie? What color is the tie? Is he hair slicked back? Or spiky?) is important.
When Horie asked the judge to let him leave the courtroom, we all had to rush out to relay that information, although we had no idea what was going on. I thought he had to go throw up.
When Horie came back five minute later, looking pretty much the same as when he had left, we had to all rush out again and relay THAT.
His lawyer told us later that he hadn’t been feeling well all day and he probably needed to use the bathroom. Horie, appearing in a TV interview in the evening, said he had diarrhea.
The whole drama is far from over because Horie is appealing.
Besides the question of his innocence, there are others:
Is the same punishment being fairly doled out for a comparable crime? I don’t remember cases of executives of major companies ever getting prison terms for this kind of white collar crime.
Does a guilty plea win lenience? I.e., what is Miyauchi’s verdict/sentence going to be next week?
How sane is a justice system that convicts 99.9 percent of its defendants?
It is often difficult to hear what the judge is mumbling from where the foreign media must sit _ the very back row.
Fortunately, all the Japanese reporters who get to sit up front are all yelling the news in their version of relay tag:
Guilty, guilty, guilty. Two years six months prison. Two years six months prison. Two years six months prison.

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The chances for an innocent verdict are very small for any trial in Japan.
But it is also unusual for a defendant to have the kind of money that Horie does to hire the best lawyers.
It is also unusual for a defendant to plead innocent. Most defendants sign confessions, sometimes acknowledging wrongdoing to try to get a lighter sentence.
It makes sense that the judges will at least consider the possiblity that Horie may really be innocent if he withstood three months of incarceration at the Tokyo Detention Center and tortuous grilling by prosecutors _ and came out still proclaiming innocence.
It’s at least something he (and Japanese society) must consider as he weighs everything to hand down what he sees as the just verdict, including whether it will be a suspended sentence or a prison term.

My one-on-one interview with Horie


My earlier interview with Horie’s lawyer

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My AP Story on today’s closing arguments 1

My AP Story on today’s closing arguments 2

My AP Story on today’s closing arguments 3

Courtroom drama: Livedoor trial.
List of Characters:
Takafumi Horie, 34. The naughty cocky kid in trouble. He looks bored much of the time. Well, a Japanese trial IS boring. Prosecutors and defense attorneys alike read from their documents, sometimes at lightning speeds and often inaudibly. (They don’t need to play to the jury. There is no jury.) But today he got choked up telling the judge that he feels he has been targeted unfairly by prosecutors who are out to get to him. He stood out too much, and he is now being made an example of. He cried, wiping off a tear with a flick of his hand. Reporters began taking notes viciously. It was unquestionably the most dramatic moment of today’s session. Horie had his back to us, standing at the podium, and it’s unclear whether he thought tears will bring empathy from the judge. When NHK reported a raid was going to happen at Livedoor, Horie was stunned, he told the judge. His PR person called the prosecutors to ask if a raid was going to happen, and she was told it wasn’t true. But the TV cameras had assembled at Roppongi Hills so the raid could proceed on televised news a few hours later. He said it was frightening. Yes, it is easy to imagine how frightening it must have been. Suddenly, they were out to get him, scrutinizing every shady deal in his company’s books, not even bothering to question him to slap a fine or demand a correction, but determined just to destroy him and arrest him.
Yasuyuki Takai, the chief defense attorney, sits down after he speaks and looks up at the high ceiling of the courtroom, looking almost half-asleep. But when he speaks, he is forceful, arguing that the case is a frameup. This is such an unsual case. Is this going to fly? It’s hard to read the judge, but it’s clear he isn’t all that convinced Horie is as guilty as the prosecutors seem to think he is. Horie clearly isn’t your typical criminal. At one point in an earlier session, the judge asked Horie if he felt any remorse for the damage that he had caused. Horie couldn’t come out and say he was sorry, as that would be too much like admitting guilt. But what is the just punishment? Is it a crime, or is it a civil lawsuit of damages to the investors who lost money, duped by his claims about his company? A new kind of person starting a new kind of business needs new kinds of regulations and perhaps a new kind of justice. The judge surely has a tough job. The verdict comes March 16.