Livedoor execs indicted for securities fraud

Takafumi Horie, prexy of former Internet powerhouse Livedoor who once tried to take over Japanese media giant Fuji Television Network, has been indicted on charges of spreading phony financial info in a takeover deal, violating securities laws.

Three of his top executives have also been charged in the October 2004 deal in which Livedoor’s ValueClick Japan, now Livedoor Marketing, acquired publisher MoneyLife in a stock swap.

MoneyLife had already been acquired by ValueClick though an investment partnership. ValueClick boosted its stock price through the fake stock swap and, prosecutors suspect, funneled profits to the Livedoor parent company without notifying tax authorities.

Horie was arrested on Jan. 23, following prosecutor raids on his home and Livedoor’s Tokyo headquarters.

He denies wrongdoing, but his three former colleagues have implicated him, according to the Nikkei newspaper.

All four were skedded for release from detention Monday, but now prosecutors will hold them for further interrogation.

Prosecutors suspect that one of Livedoor’s three remaining directors, Fumito Kumagai, may also be involved. If he is arrested and forced to resign, Livedoor will fall below the legal minimum of three directors and face yet another crisis.

At the end of trading Monday, Livedoor shares plunged 30 points to ¥61 (51¢) per share, a 32.9% drop from the share price at the end of Friday’s trading on the Tokyo Stock Exchange.

 The 30-point drop is the maximum allowed in a single session, according to TSE rules.

 Livedoor’s capitalization has fallen from $6.2 billion on Jan. 16 to $547 million Monday.

Meanwhile, Fuji TV, which owns 12.75% of Livedoor, will not include the $305 million loss it has sustained on its Livedoor holdings in its financial results for the 2005 fiscal year, which ends in March. Fuji bought its 12.75% stake in Livedoor for $276 million.   

Instead it has hiked its estimates for the current fiscal year from $4.5 billion in sales to $5 billion and from $196.6 million in after-tax profits to $203 million.

One reason for the new forecast is better-than-expected spot ad sales. Another has been the success of Fuji’s first film release of 2006, Koki Mitani’s “Suite Dreams,” which is expected to pass the $40 million B.O. mark.

Once Fuji factors in its Livedoor loss into the next accounting period, however, its profits may well plunge into the red.

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