Brash Japanese Internet entrepreneur arrested

updated 9:48 a.m. ET Jan. 23, 2006

TOKYO - Japanese authorities on Monday arrested Takafumi Horie, the chief executive of Internet portal Livedoor Co. at the center of a financial fraud probe that has roiled Tokyo’s stock market, prosecutors said.

The investigation into Livedoor also spread to Japan’s political sphere Monday, with politicians grilling Prime Minister Junichiro Koizumi over his political support of Horie, a brash, young entrepreneur who had run for a parliamentary seat last year.

The arrests of Horie and three other executives culminates a weeklong investigation into Livedoor Co. which began with a surprise raid on its Tokyo headquarters and 33-year-old Horie’s home last Monday.

The probe triggered a sell-off on Japan’s stock market, where the benchmark Nikkei 225 index fell 2.14 percent Monday. Since the start of last week, the index has plunged 6.7 percent.

Tokyo prosecutors said Horie and the three others were arrested on charges of spreading false information to inflate stock prices. Prosecutors said in a statement that they had given false information about Livedoor’s affiliate companies to cover up losses at a subsidiary and boost its own stock price.

Horie, who has become a TV star in recent years for his bold buyouts and for challenging the stodgy business elite, has repeatedly denied wrongdoing.

“I have no recollection on any of the allegations. And I don’t even know how to comment because I have no idea what kind of investigation the media reports are coming from. That’s the situation,” Horie wrote in his blog over the weekend.

Arrested with Horie on Monday were Ryoji Miyauchi, Fumito Okamoto and Osanari Nakamura, all 38-year-old Livedoor executives.

Horie’s arrest is certain to be a blow for his fans, including many individual investors and youngsters, who had looked toward the unpretentious T-shirt-donning university dropout as an inspiration for a new kind of managerial leadership and glamorous lifestyle.

Horie had been widely seen as the face of a new corporate Japan — the antithesis of the stereotypical docile Japanese salaryman who unquestioningly takes orders and clings to jobs under a tradition of lifetime employment that has increasingly been cast off amid global competition and cost cuts.

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