Livedoor executives questioned

Prosecutors questioned top executives of Japanese internet company Livedoor yesterday as new allegations emerged related to the investigation, which sparked chaos on the Tokyo Stock Exchange this week.

Livedoor chief financial officer Ryoji Miyauchi, director Fumito Kumagai and at least one other official were summoned, media said.

Authorities believe the once high-flying company, led by maverick chief executive Takafumi Horie, mishandled more acquisitions than initially suspected, media reports said.

Livedoor meanwhile said late night it had submitted the findings of an internal investigation to the Tokyo Stock Exchange, but the exchange said the disclosure was not sufficient.

The report, which was made public, provided little new critical information, and the company said it had difficulty in finding out details as many documents had been taken away by prosecutors.

Although Livedoor met its midnight deadline to submit the findings, the exchange said it had placed the company's stock on its "disclosure cautioned securities" list to alert investors.

"We don't think the disclosure was good enough and we ordered Livedoor to make better disclosure," a spokesman said, although no deadline for further disclosure was set.

News of the expanding investigation capped a tumultuous week that included the apparent suicide of a key figure in the case and a 50 percent plunge in Livedoor's market value.

The investigation has put a spotlight on Japanese start-up companies that have grown flamboyantly, mainly through aggressive acquisitions, in defiance of traditional Japanese business practices that honour harmony and modesty.

Fallout from the investigation wreaked havoc on the Tokyo Stock Exchange, forcing the bourse to shorten its trading hours on Wednesday after investors flooded the market with sell orders and nearly overwhelmed its computer systems.

Livedoor stock has lost about 52 percent, or $3.3 billion (€2.7 billion), in value since authorities raided its headquarters on Monday on suspicion it had spread false information to investors.

Media reports have said the Livedoor group issued new shares to "acquire" companies that were already under its control and then sold them in the market for a profit, which it then used to pad its earnings.

"Each of the actions are within the boundaries of the law, but when you look at the entire picture the actions are questionable," said Takanobu Takehara, an attorney for Nishimura & Partners in Tokyo.

Mr Takehara said the investigation would likely centre on whether Livedoor executives masterminded a plan to deceive the public for profit and how much control they had over the investment partnership they used in the transactions.

The prosecutors' case has been complicated by the apparent suicide of Hideaki Noguchi, a vice president at HS Securities , the investment firm believed to be involved in the transactions under scrutiny.

Mr Noguchi, a former executive at Livedoor's predecessor company, Livin' on the Edge Co., was found dead on Wednesday after being questioned by investigators. Livedoor's portal, www.livedoor.co.jp, is one of Japan's most popular websites, but the group has a broad portfolio of nearly 50 internet-related businesses that range from consulting and software companies to network management, e-commerce and e-finance firms.

Livedoor has made headlines over the last couple of years as Mr Horie attempted to buy a baseball team, take over Fuji Television and win a seat in parliament. All of the attempts failed.

The company, which caters to individual stockholders, had 220,000 stockholders at the end of September, more than its rivals such as Softbank and Rakuten , which had 191,000 and 135,000 shareholders, respectively.

About 17.8 percent of its stockholders are foreign including US mutual fund manager Capital Research & Management Co.