Brokers and Brokerage

Takafumi Horie, the brash entrepreneur whose rise captivated Japan and whose fall unsettled the Tokyo Stock Exchange, was arrested on Monday night on suspicion of spreading false financial information to deceive investors.

Prosecutors said Horie and three other Livedoor executives who were also arrested had tried to pump up share prices through misinformation and had issued new shares to "acquire" firms already under their control and then sold the companies to create false profits.

It was a steep fall for Horie, who is 33 and only last month was telling workers at a company Christmas party that his ambition was to make his Internet-based conglomerate the world's largest company.

The arrests came after trading had ended for the day on the Tokyo Stock Exchange. The Nikkei dropped 336.04 points on Monday, or 2.1 percent, partly because of the drop Friday in American stocks and party over concerns that other Japanese Internet and technology start-up companies might also have bent the rules.

A weeklong fever to sell Livedoor stock after the authorities raided the company's headquarters has wiped out almost two-thirds of Livedoor's value. Last weekend, the Tokyo Stock Exchange designated the stock as an issue requiring "special vigilance," a step toward possible delisting.

But a top Japanese finance official said Monday on public television that the investigation and the market turmoil would not choke off Japan's nascent economic recovery.

"There's no worry whatsoever, because the problem is limited to Livedoor," Kaoru Yosano, the financial services minister, said on NHK. "The economic fundamentals of Japan will not waver over this incident."

Horie, a University of Tokyo dropout, parlayed a 1995 investment of $50,000 into a company that had a $6 billion market value before last week.

In August, Prime Minister Junichiro Koizumi selected Horie to run against a governing party "dinosaur." The party elder won, but the race further bolstered the aura of a business upstart who once said that "all the evils come from aged business managers."

Indeed, while many Japanese debate the rights and wrongs of the financial charges against him, the transgressions Horie committed that caused millions of Japanese to gasp were societal and sartorial.

As part of his general disrespect for older business leaders, he would often wear a T-shirt to negotiations with men in suits. In a country where consensus and the common good are held up as ideals, Horie rode around Tokyo in a Ferrari with various models as girlfriends. In what now seems prophetic, he named his first company Livin' On the Edge.

"While most people drive their cars on the highway, Horie chooses to drive on the shoulder," Haruo Shimada, a Keio University economics professor, said in an interview. "Many times he goes into the rice paddy, but then he claims he is still on the shoulder. He really behaves like that, and many people get mad and upset by his behavior."

The others arrested on Monday were three 38-year-old aides: Ryoji Miyauchi, chief financial officer; Fumito Okamoto, a director; and Osanari Nakamura, president of Livedoor Finance.

Koizumi, who already has announced plans to step down next September, said of the man who posed for campaign photographs with him four months ago: "If he violated the laws, the case should naturally be strictly responded. Even in the new age, it is necessary to follow laws. This is a different matter from deregulation that we should promote."

[ Comment, Edit or Article Submission ]