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JAPAN: Japan Arrests Corporate Raider on Securities Charges

by Martin FacklerThe New York Times
June 5th, 2006

A self-proclaimed corporate raider who struck fear into Japan's insider-run boardrooms by demanding American-style shareholder rights was arrested on Monday on suspicion of insider trading.

In a statement, Tokyo prosecutors said Yoshiaki Murakami violated securities laws early last year by buying 9.95 billion yen ($90 million) worth of shares of a radio station after hearing directly from another company, the Internet portal Livedoor, that it was also buying shares. At the time, Livedoor was preparing to start a hostile takeover of the radio company, Nippon Broadcasting.

Prosecutors said the evidence came to light during a separate investigation into suspected accounting fraud at Livedoor. Prosecutors raided Livedoor in January, arresting several executives including the founder, Takafumi Horie.

On Monday, a team of prosecutors raided Mr. Murakami's office in Roppongi Hills, a luxury high-rise complex in Tokyo that has become a symbol of the nation's new rich.

In a hastily called news conference held hours before his arrest, and broadcast live on most major networks here, Mr. Murakami, 46, admitted he had broken the law. He said he had signed a statement to that effect on Sunday after two days of interrogation by prosecutors.

During the interrogations, he said, he at first denied breaking the law because, he said, he did not buy the shares at Livedoor's urging. But he said he finally conceded that prosecutors had a point that the purchase was legally questionable because he made it after a Livedoor executive, Ryoji Miyauchi, told him of Livedoor's intention.

"I concluded that I made a mistake," Mr. Murakami told reporters, bowing deeply in a traditional show of remorse. "As a pro among pros, I apologize for the violation."

If found guilty of insider trading, Mr. Murakami faces up to three years in prison and a $30,000 fine.

Mr. Murakami said he was stepping down as head of MAC Asset Management, the largest in the family of activist funds that he founded seven years ago. MAC Asset, popularly known in Japan as the Murakami Fund, manages about $3.6 billion in assets.

The resignation ends, at least temporarily, a financial career that produced landmarks like Japan's first indigenous hostile takeover attempt six years ago when Mr. Murakami tried to win control of a midsize real estate company.

Mr. Murakami won both applause and derision here for importing the tactics of Wall Street's corporate raiders, buying chunks of companies and then pressing management to enrich shareholders. Mr. Murakami became a national figure last year when he tried to take over a railway and department store operator that owned one of Japan's most popular professional baseball teams, the Hanshin Tigers, and then proposed spinning the team off as a separately listed company.

"Even if I have been called various names, my mission has been to make this stock market a respectable place," Mr. Murakami said Monday, speaking of Japan's stock market. "I decided to withdraw from this world today because it is wrong for me to continue to be in this world after such a violation."

Japan appears divided over how to interpret the arrests of first Mr. Horie and now Mr. Murakami. Some called it a welcome attempt by authorities to close loopholes and bring Japanese financial regulations up to the standards of other countries.

But others called the moves a warning by Japan's establishment against the new breed of aggressive investors whom Mr. Murakami and Mr. Horie represented. While delighting investors and bringing hope to younger generations of Japanese who want to change the country's stodgy business ways, Mr. Murakami's hard-knuckled tactics had repeatedly drawn the anger of Japan's old guard.

"If this means markets will become fairer for everyone, then it's a plus," said Toru Nagasawa, a Tokyo-based lawyer specializing in corporate governance. "But if it just means that the nail that gets up will get hammered down, then it is a minus."

"If this is a denial of shareholders speaking out, then it is a definite minus," he added.

Speculation had been rife for weeks of an investigation into Mr. Murakami, reaching a fevered pitch last week after he returned from Singapore hiding his unshaven face under a baseball cap and sunglasses. Perhaps anticipating legal problems, he had moved most of his investment operations to Singapore last month.

A greedy greenmailer to some, a path-breaking champion of shareholder value to others, Mr. Murakami has been one of the most controversial figures of Japan's recent bull market in stocks.

A former trade ministry bureaucrat who quit in 1999 to start his own fund, Mr. Murakami bullied corporate managers in ways that Japan had never seen before, winning the reputation as the country's answer to Carl C. Icahn or Boone Pickens.

Unlike the flamboyant Mr. Horie, who reveled in tweaking the establishment's nose with his spiked hair, T-shirts and biting comments, Mr. Murakami favored the dark suits and modest ties of salarymen. Mr. Murakami also shunned the press and spoke more carefully in public.

Along with Mr. Horie, Mr. Murakami had become a symbol of the gloves-off American style of capitalism that has caught on here as market changes rejuvenated the $4.6 trillion economy. The long-awaited recovery touched off a long rally in Japanese stocks, which investors like Mr. Murakami and Mr. Horie rode to great wealth.

The changes helped make Tokyo one of the world's best-performing stock markets in recent years. But many here also believe that the bull market became fertile ground for fast-and-lose moneymaking schemes not unlike those that flourished in Wall Street in the 1980's.

Prosecutors had long been hinting of a crackdown. In past statements, they have talked of cleaning up financial markets to open a level playing field for all investors.

They have also expressed distrust, and distaste, for Wall Street-style financial maneuverings, an aversion that is widely shared in Japan's business community. Many in Japan look down on gains from takeovers, proxy fights and even stock trading itself as paper profits and not real work, and therefore immoral.

"We cannot let this become a society where people who sweat from their labor, or who want to work but can't because of restructuring can be taken advantage of," the chief of the special investigation department of the Tokyo Prosecutors Office, Motonari Otsuru, wrote in a statement posted on the office's Web site last year. "When people see news reports of these things, they get angry."

Still, some expressed surprise that prosecutors moved against Mr. Murakami, who was seen as having carefully cultivated connections with politicians and policy makers. He is reported to count among his friends the central bank governor and several lawmakers from the ruling party.

Mr. Murakami also showed a flash of public relations acumen in pre-empting his arrest with the televised news conference. This allowed him to make public his side of the story before prosecutors could put him away in a cell, as they did Mr. Horie.

While Mr. Horie was locked up, prosecutors constantly leaked details of their investigation to the Japanese news media, effectively painting Mr. Horie as guilty and ruining his reputation before he could stand trial or even speak publicly to defend himself.

Since his release last month, Mr. Horie has denied wrongdoing. But Japanese media reports say several of his employees, including Mr. Miyauchi, have told prosecutors they spread false information to inflate the stock price of Livedoor.




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