KYODO / REUTERS

HOT SEAT: The normally cocky Horie was on the defensive after prosecutors raided Livedoor's offices

Living on the Edge
	High-flying tycoon Takafumi Horie is entangled in a fraud investigation, rattling stock markets and raising doubts about Japan's economic recovery
	By Jim Frederick | Tokyo

Posted Monday, January 23, 2006; 20:00 HKT
On any given day over the past two years, reporters could be found hanging out at the Segafredo coffee bar in the lobby of Roppongi Hills' Mori Tower, one of Japan's swishest office buildings. They were usually waiting for Takafumi Horie, the 33-year-old founder and CEO of Livedoor, one of Japan's hottest Internet companies, whose offices are located on the 38th floor. For passers-by, it was easy to evaluate the magnitude of that day's Horie news by counting the number of reporters on stakeout—in Japan, you see, Horie made the news almost every day. If Livedoor had just announced the acquisition of another company to add to its growing empire, or if Horie was seen dining with a starlet, there may have been just a handful of scribblers keeping watch. But if Horie was up to one of his grander stunts—running for parliament, say, or trying to take over one of Japan's largest radio networks (both of which he attempted last year)—a crew from every news organization in the country would be lying in wait to pepper him with questions and follow him to his nearby home.

Just after dusk on Jan. 16, however, something very different and far, far larger was afoot on the Horie beat. More than 100 reporters set up camp outside the building that evening. They had been tipped off by the Tokyo District Court's Public Prosecutor's Office that Japan's controversial corporate wunderkind was about to be raided as part of an investigation into suspicions of illegal securities manipulation. Searching late into the night at Livedoor's offices (as well as at the homes of top executives), investigators carted off computers, files and papers as flashes popped and video cameras panned. Seemingly overnight, Horie's universe had imploded, and the shock waves are still reverberating around the country and the global investment community. The news sparked a two-day nosedive for Japanese stocks that cost investors nearly $40 billion, and the volume of sell orders was so great that it forced the world's second-largest stock market to shut down for 20 minutes, much to the embarrassment of its bemused regulators. The scandal has also unleashed a wave of worry about the solidity of Japan's much-heralded economic recovery. If Horie, this budding superhero of the New Economy, was not all that he seemed to be, skeptics asked, what other nasty surprises might be lurking ominously beneath the surface?

According to Japanese media reports, prosecutors suspect that Livedoor deliberately provided false information designed to boost the stock price of one of its subsidiaries. In October 2004, Livedoor announced that a subsidiary now called Livedoor Marketing was planning to acquire a publisher called Money Life via a stock swap, although media reports claim it had already acquired that company with cash. From October to November of 2004, the subsidiary's stock soared 150%, fueled by news of this deal. The penalty for such a crime is a fine of up to $500,000 and five years in prison.

Continued...

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