Livedoor news: tmcnet.com
<Livedoor invested 1.6 bil. yen in 2 funds at center of fraud scandal+
(Japan Economic Newswire Via Thomson Dialog NewsEdge)TOKYO, Feb. 8_(Kyodo) _ Livedoor Co. and its key arm Livedoor Finance Co. invested some 1.6 billion yen in two of three investment funds at the center of allegations the three were used to transfer back huge illicit gains from sales of new shares in a Livedoor unit to the Livedoor side, according to investigative sources and Livedoor's recent press release.
The two funds are the EFC investment fund and the M&A Challenger No. 1 investment fund. Livedoor Finance invested 800 million yen each in the two funds in 2003 with Livedoor itself directly investing an additional 1 million yen in EFC, according to the Livedoor release issued Tuesday.
The special investigative squad of the Tokyo District Public Prosecutors Office is now trying to shed light on how the proceeds from sales of news shares in the Livedoor subsidiary, ValueClick Japan Inc., were transferred to the Livedoor side, the sources said.
Investigators have already found that EFC invested in M&A Challenger No. 1, which in turn invested in another investment fund VLMA No. 2.
M&A Challenger No. 1 was represented by H.S. Securities Co. Vice President Hideaki Noguchi, who was found dead Jan. 18 with several stab wounds, including an abdomen wound, on a hotel bed in Okinawa Prefecture hotel.
Local police initially depicted the case as a suicide, but later said an investigation into the case is still under way. Noguchi was a former director of Livedoor Finance's predecessor, an investment company called Capitalista Co.
The direct and indirect investments by Livedoor and Livedoor Finance into the three funds appear to support the suspicion that the funds were under Livedoor control, the sources said.
In the alleged accounting fraud, ValueClick, which later changed its name to Livedoor Marketing Co., issued a large sum of new shares on Jan. 20, 2005, claiming that the new shares would be exchanged for the shares in the publisher Money Life. ValueClick had announced in a press release on Oct. 25, 2004 that it would acquire the publisher via a share swap.
But prosecutors have already found this statement to have been false, because the Livedoor-controlled VLMA No. 2 had paid cash for the publisher in June 2004.
VLMA No. 2 made a convenient receptacle for both the Money Life shares and ValueClick shares.
Money Life handed over its shares to VLMA No. 2, which in turn transferred the shares to ValueClick.
Meanwhile, new ValueClick shares issued in exchange for Money Life shares were transferred to VLMA No. 2, which then sold the ValueClick shares to investors at a high profit. The fund then transferred back the proceeds to the Livedoor side via various entities, the investigative sources said.
On Jan. 23, Horie, 33, together with former Livedoor Chief Financial Officer Ryoji Miyauchi and Livedoor Finance President Osanari Nakamura, both 38, and another group executive were arrested on suspicion of having spread false information, misleading investors and manipulating ValueClick's stock price in breach of Japan's Securities and Exchange Law.
According to the Livedoor release, Horie, Miyauchi and Nakamura were EFC board members, while Hiroshi Haneda, who had represented EFC, is now a Livedoor board member.
On Nov. 12, 2004, ValueClick released an earnings report for the January-September period of that year, saying it posted parent-only pretax and net profits of 72 million yen and 53 million yen, respectively. The prosecutors allege the profit figures were inflated.
The earnings report, coupled with the effects of the Nov. 8, 2004, announcement of a 100-for-1 ValueClick stock split, boosted the company's share price to 27,000 yen per share Jan. 20 last year, more than 10 times its price as of the split announcement.
Investigative sources earlier said that Horie, Miyauchi and other Livedoor group executives are likely to be served fresh arrest warrants in mid-February on suspicion of falsifying the company's 2004 financial figures.
Livedoor has faced allegations that it falsified its financial statements for the business year to September 2004 by posting a parent-only pretax profit of 1.4 billion yen although it actually incurred a pretax loss of 1.0 billion yen, they said.
Starting in 2003, Livedoor issued new shares or had its subsidiaries issue new shares to exchange for the shares of takeover target firms based on overvaluations of their worth, a strategy to allow Livedoor and its group firms to float large numbers of shares, according to the sources.
<The prosecutors have concluded the takeover deals had the principal aim of selling shares for big profits, the sources said>. >
Big profits? Oh how awful. Silly me, I thought that's what managers of companies are supposed to achieve.
Meanwhile, the subsidiaries are doing just fine: tmcnet.com
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