livedoor scandal

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Who called him the 'flag-bearer' of reform?
Akahata, editorial

Livedoor Co. CEO Horie Takafumi (resigned on January 24) and three other executives were arrested on suspicion of violating the Securities and Exchange Law.

The growth of Livedoor Co. was made possible by jacking up share prices to make buyouts easier. In that process, Livedoor allegedly provided false information and window-dressing accounting, in which CEO Horie was involved.

Needlessly, the whole picture of Livedoor "alchemy" which deceived the market must be exposed. At the same time, Liberal Democratic Party politics must be held responsible for inciting money-games by easing financial regulations, the root of this case.

Is deregulation a cure-all drug?

Livedoor cleverly used equity-swaps and stock split-ups through a subsidiary investment fund. The Commercial Law was revised in 1999 to introduce the equity-swap system, and the 2001 deregulation enabled free stock splitting.

These measures were what financial circles had wanted. In 1999, at "the industrial competitiveness council" headed by Prime Minister Obuchi Keizo at the time, business leaders made clear their position. Okuda Hiroshi, then president of Toyota Motor Corp. ,said, "We are concerned about the report that the enactment of the equity-swap system is unlikely during the current Diet session. We want the earliest possible passage of the bill." Idei Nobuyuki, then president of Sony Corporation said, "Sony Corporation plans to use the stock-swap system early next year, so we want the system approved in the current Diet session at any cost.".

Business circles and the LDP together promoted the profit-driven deregulation, making "alchemy," like Livedoor, possible.

Japanese Communist Party Chair Shii Kazuo on January 24 questioned Prime Minister Koizumi Jun'ichiro about his responsibility for laying the groundwork for the Livedoor fraud and for praising Livedoor as the "flag-bearer of reform." Prime Minister Koizumi spoke as if he had nothing to regret, "This case is one thing, and the LDP's support for him in the previous general election quite another."

He cannot deceive the public by pretending that he has nothing to do with the scandal.

The public remembers that Koizumi lauded Horie's candidacy in the general election last September, saying, "It's great to see a young man like you coming into politics."

Chief Cabinet Secretary Abe Shinzo said when he was the LDP's acting secretary general, "Mr. Horie could not succeed without the Koizumi Cabinet's structural reform." LDP Secretary General Takebe Tsutomu said to Horie, "I need your help for party reform."

Asked by reporters on January 24, Minister of Economic and Fiscal Policy Takenaka Heizo said, "It is wrong to connect the latest problem and the Koizumi reform."

However, Takenaka joined Horie campaigning during the election in his constituency in Hiroshima Prefecture and gave speeches in support of him. Holding Horie's arm, Takenaka said, "Koizumi, Horie-mon (Horie's nickname), and Takenaka will accomplish the reform." Takenaka is the one who exalted Horie as the "flag-bearer of reform."

Drastic change needed

Experts in the Securities and Exchange Law point to the illegality of "off-hour trading" used by Livedoor when it bought up the shares of Nippon Broadcasting System. However, then Minister of Financial Services Ito Tatsuya, known as Takenaka's aide, immediately approved it by commenting that it was "legal."

Calling for the private sector to be used as much as possible, the Koizumi Cabinet has promoted the "structural reform" agenda based on privatization and deregulation as a panacea. It has encouraged speculative trade calling for "investment instead of saving." The Koizumi Cabinet is the founder of the Livedoor "alchemy."

The need now is to root out the cause: the Koizumi Cabinet's "structural reform" and deregulation. - Akahata, January 25, 2006