Investigation For Securities Fraud
On January 18, 2006, Japanese prosecutors raided the offices of Livedoor and Horie's home on suspicion of securities fraud and money laundering. Livedoor's share price fell 14.4 percent in one day, with sell orders so numerous that trading volume prompted the Tokyo Stock Exchange to close 20 minutes early for the first time in its history. The Nikkei index lost 465 points, its largest drop in nearly two years; the ramifications were felt in other markets around the world, especially in Asia.
The veracity of the suspicions aside, many smelled conspiracy given the timing of the action. It was seen as a political move by defenders of the status quo to punish Horie for daring to challenge them, and to discredit him and the business practices he had come to represent, which Horie's opponents considered distasteful and "un-Japanese."
On January 23, 2006, Horie was arrested by Tokyo district public prosecutors, and on January 24, he announced his resignation as CEO. On April 27, 2006, he was released on ¥300 million bail on the condition that he refrain from any contact with Livedoor or its employees. Horie said he would not participate in the company's management again. Though indicted on charges of fabricating financial reports and spreading false information to investors, he continues to assert his innocence.
Horie's net worth is estimated to have fallen from $1.3 billion in December 2005 to $280 million in June 2006.
Horie's trial for securities fraud began on September 4, 2006. Prosecutors sought a four-year prison sentence for Horie, who pleaded not guilty.
On March 16, 2007, Horie was found guilty of falsifying the company's accounts and misleading investors and was sentenced to 2 years and 6 months imprisonment. He appealed the punishment, but the Supreme Court of Japan on 26 April 2011 upheld the sentence.
Read more about this topic: Takafumi Horie
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“Things gained through unjust fraud are never secure.”
—Sophocles (497–406/5 B.C.)