Horiemon profiled in NYTimes

[gkanai]

[Charles]

..My personal opinion on Horiemon is that if he was going to do everything that he did, in terms of going up against the establishment, he should have had a squeaky clean closet with no skeletons. This was not the case with Horie.

Nobody is that clean.

[Mulboyne]

Nobody is that clean.

I think that is right. It is too simplistic to say that Horie took on the establishment and the establishment had its revenge. The lines are not that clearly drawn. Yoshiaki Tsutsumi was arrested well before any action against Horie and his political connections were legendary. There was a sea change, as there often is in Japan. Several factors combined to undermine Livedoor. On the one hand, financial regulators had begun to get tougher in order to restore confidence to the public markets. Aside from Kokudo, executives at Kanebo and several accounting companies drew fire for practices that they believed were previously sanctioned by the authorities. The NPA had also made a point of going after public companies which were little more than fronts for the Yakuza. Many of these companies were internet operations or Mothers-listed vehicles. On top of that, the tax agency had stepped up its attempt to uncover tax evasion and fraud, partly in tandem with these other efforts but also as a means to cope with the country's parlous fiscal position. It wasn't inevitable that Livedoor would get caught in the crossfire but this background does explain why, when an investigation started, things unravelled so quickly.

How much of an outsider was Horie? He certainly had enemies but it is a rare businessman who finds success without making any. He had just been invited by the Prime Minister to stand as an independent in the election with the backing of the ruling party. Toymaker Takara used his public image to relaunch their "Game of Life". He was a regular guest on virtually all TV channels. Even Fuji, before his bid attempt, had produced a drama loosely based on the Roppongi Hills crowd. He found financing from Lehman Brothers but he could just as easily have got it from Mizuho. He may not have been an total insider but he was more of a maverick than an enemy of the establishment. Remember also, that Yoshiaki Murakami - also currently in court - counted no less a figure than the Bank of Japan Governor as one of his investors. The demarcation between "outsiders" and "the establishment" is just not that clear.

What is still uncertain is how the courts will see these cases and what they may mean for future trials. Both Horie and Murakami have pleaded not guilty which means that prosecutors have to make their case. More recently, the two most senior executives of Nikko Cordial have resigned. The company has been fined and faces the possibility of a delisting from the stock exchange. The offences at the firm are not a million miles away from those Livedoor is accused of: false accounting relating to an acquisition and issuing securities based on those false accounts. Neither executive has been arrested. This could mean that the law is being applied unevenly or that the offences are subtly different in a way that is not immediately apparent to the naked eye. It could also mean that the prosecutors are reluctant to put someone else in the dock while the courts have yet to decide on the fates of Horie and Murakami. It is clear that they hoped for confessions to bring convictions. Horie stood his ground despite a lengthy incarceration. Murakami escaped that fate by publicly admitting his guilt and then changing his tune when he appeared in court. Whichever way the verdicts go, there will be major repercussions for corporate governance.