Wednesday, January 25, 2006

The Nail Geek

A cabal ? A Geek story or a big thrill for Investments
Funds in Japan from now on thanks to the eternal rivalry
between bureaucracy and advocates of engineering
financial new products in an archipelago where
entrepreneurs better wear dark suits and not drive a
Ferrari ! "Takafumi Horie, 33 arrested late Monday on
suspicion of securities laws violations in spreading
false information about subsidiaries, covering up losses
and inflating stock prices ran one of this nation's most
popular blogs, or Internet journals. Blogging has grown
rapidly in Japan in recent years, especially among
caber-savvy young people whom Horie especially
attracted. After prosecutors raided his office and home
Jan. 16, Horie used his blog inundated with comments.

Bloggers alternately expressed adoration as well as
sympathy. Notes left on the site repeatedly asked
whether Horie was being punished as in the classic
Japanese proverb, "The nail that sticks out gets
hammered in," as is often the case in this conformist
society or if he was merely getting what he deserved.
"You've got to be kidding," wrote one angry blogger.
"Give me back all the money I invested, placing such
hope in you. I hate you and will never forgive you."
"Keep fighting," said another one, with red heart

Founded in 1997, Livedoor Co. offered software
downloads, ran consulting and finance units, and
branched out into other areas, such as used car sales
and electronic shopping. It rose from a tiny startup to
a high-profile company by gobbling up other companies.
Livedoor also attracted an unusually large number of
individual investors because of Horie's flamboyant
visibility. Blunt and defiant, Horie was a frequent
guest on TV shows and won both fans and notoriety for
trying to buy out a baseball team two years ago and take
over the major media conglomerate Fuji Television
Network Inc. last year. Both efforts failed, as did
his bid to run for office in lower house elections last
year. But many came to view him as the face for a new
generation of business leaders in Japan.

Even after his arrest, it was clear Horie had won some
people's hearts. Prime Minister Junichiro Koizumi on
Tuesday acknowledged his responsibility for supporting
the candidacy of arrested former Livedoor Co. President
Takafumi Horie in the general election last fall. "I
would humbly accept responsibility" if a political party
is to take the blame for backing a candidate who has
been later found to have violated law, Koizumi, leader
of the ruling Liberal Democratic Party, told reporters
at his official residence. But he tried to win
understanding over the difficulty of scrutinizing a
person before deciding to give support in elections. "It
is difficult to check every aspect of a person," Koizumi
said. Koizumi also said the arrest of Horie over
alleged security fraud should be dealt with separately
from his own drive to promote deregulation in the
Japanese economic sector.

The prime minister was apparently referring to
accusations that his structural reform policy has
produced persons like Horie who are said to give the
highest priority to money earned due to removals of
rules and regulations. Koizumi said the government
plans to ask a panel of experts to consider revisions to
Japan's securities-related rules including giving a
stronger authority to the Securities and Exchange
Surveillance Commission. In a press conference earlier
Tuesday, LDP Secretary General Tsutomu Takebe apologized
for having supported Horie in campaigning for the House
of Representatives election but added it was his
personal move. "I supported (Horie) on my own judgment,
without consulting with Prime Minister Koizumi," Takebe
said. "I personally think I should reflect on what I
should do."

Takebe reiterated that the party did not officially
endorse Horie as its candidate because Horie refused to
resign as president of the Internet service firm. As a
result, Horie, who accepted Koizumi's request to vie in
the contest, ran as a pro-LDP independent. Takebe and
other LDP leaders nevertheless gave him pep talks in a
stumping tour in his constituency in Hiroshima
Prefecture, saying, "Mr. Horie is my younger brother or
my son." He challenged old fox Kamei Shizuka, conservative
and ex policeman.

In a meeting Tuesday afternoon of the LDP's
decision-making General Council, Koichi Kato, a former
LDP secretary general, accused Takebe of having
attempted to "invite a person who behaves as if money is
everything." Koizumi, Takebe and other key LDP figures
had until Tuesday refused to take any blame for their
election behavior despite an argument by the main
opposition Democratic Party of Japan that Koizumi as
party head should take "moral responsibility."

In a separate news conference Tuesday, Internal Affairs
and Communications Minister Heizo Takenaka dismissed the
DPJ argument that his and his colleagues' pep talks were
tantamount to government guarantees of Horie. But
voices regretting the behavior rose Tuesday even among
Cabinet members and inside the LDP as the scandal
developed Monday night into the arrest of Horie and
other Livedoor group executives. Yoshitaka Murata,
chief deputy chairman of the LDP's Diet Affairs
Committee, said in a press conference that the party
will have to learn a lesson by reviewing whether it had
supported Horie's campaign based on "careful

Agriculture, Forestry and Fisheries Minister Shoichi
Nakagawa said, "I think it was not good as things turned
out," and Health, Labor and Welfare Minister Jiro
Kawasaki said not only politicians but also the media
have to feel responsible for "overrating" Horie. The
LDP, meanwhile, decided to discuss ways to reinforce the
Securities and Exchange Surveillance Commission and
revise the Securities and Exchange Law to prevent a
recurrence of similar frauds. Financial Services
Minister Kaoru Yosano said his agency will consider
increasing the number of employees in the SESC to boost
its monitoring capability, while ruling out making the
securities watchdog independent from the Financial
Services Agency.

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