Japan Watches as Internet Mogul Is Brought In

The motorcade taking Takafumi Horie across Tokyo’s elevated expressways was broadcast live to a bewitched nation Monday night, its aerial shots and excited commentary just the sort of media circus the 33-year-old Internet mogul always coveted, even cultivated.

This journey, however, was taking him from cocksure celebrity to accused stock cheat.

The founder and chief executive of online portal Livedoor Co. was arrested Monday night, along with three key partners, on allegations that they spread phony financial information to pump up the company’s stock price ahead of a takeover. Prosecutors are also investigating whether Livedoor padded its books to show a more profitable bottom line.

The televised trip to a detention center was the culmination of a weeklong drama that began with raids on Livedoor’s offices in Tokyo’s swank Roppongi Hills complex, the headquarters and after-hours playground for Japan’s flashy, young infotech crowd.

It ended with the company that has been the symbol of Japan’s emerging entrepreneurial wave in near ruins, its market value in free fall from $6.3 billion to just over $2 billion.

Horie has not been charged with a crime. But the swiftness of his fall from grace is remarkable for more than just its whiff of hubris. The humbling of Horie shows there still are teeth in “old Japan” -- the conservative establishment that has ruled business, politics and media from the backrooms for more than half a century.

The “Livedoor shock,” as the affair has been dubbed, has been a head-on collision between the ostensibly civil and gray business class and a bold and impatient avant-garde, symbolized by Horie’s spiked hair and signature T-shirts.

Horie was the personality and voice of that new generation, the unofficial chief of the “Hills Tribe,” as the Roppongi crowd is known. He was the geek-turned-rock star businessman, one part Bill Gates and one part Bono, without either man’s charitable impulses.

“He offered me and other young people a new value and opened a new path,” said Akihito Hotehama, 21, a Tokyo University student and former Livedoor intern who said Horie inspired him to start up a small educational materials business.

“Before he appeared, there wasn’t this boom in starting up new businesses,” Hotehama said. “He gave us a dream.”

But Horie’s business antics, his bromides that greed is good, his book titled “Earning Money Is Everything,” irritated the Japanese establishment. He tried to crash one of Japan’s coziest upper-class clubs by attempting to buy a bankrupt professional baseball team, then called the owners who successfully blackballed him “old men frightened of anyone with new ideas.” He suggested he could become prime minister one day.

But he also was a missionary for the power of the Internet, building an online empire that offered services from rock-concert ticket sales to stock trading. His attempted hostile takeover of Fuji TV, the nation’s biggest private broadcaster and a company far larger than Livedoor, was accompanied by enthusiastic talk about the possibilities of Internet TV.

The notion of a 33-year-old university dropout taking over Fuji TV caused apoplexy in boardrooms.

Horie further angered and frightened the establishment by amassing his stake in Fuji TV’s parent company through after-hours trading, a legal tactic, but one his critics decried as discourteous.

The audacious bid failed. But it gave Horie enough of a stake to forge a partnership with the broadcaster. Fuji found itself holding 12% of Livedoor shares and a seat on Livedoor’s board.

Fuji TV executives show no sign of waiting to see how the investigation plays out. The company resigned its board seat and threatened to go to court to recoup its losses from Livedoor’s tumbling share price.

The mainstream Japanese media have, for the most part, ganged up on Horie. The accumulated weight of the daily drip of leaks from the investigation has painted Livedoor as a sand castle that operated in gray areas to inflate Livedoor’s stock price. Quoting anonymous prosecutors, the news media amplified leaks suggesting that Livedoor executives have confessed to spreading false information on the premise that they believed what they were doing was legal.

There has been no corresponding public demand for the prosecutors to reveal what, or who, sparked their investigation.

The harshness of the attacks, however, has raised questions about whether Horie has been targeted by one of his numerous enemies.

“Many people liked him, but many hated him, too,” Hotehama said. “They think he is too arrogant, and he was saying he would destroy vested interests.

“It’s natural for the establishment to be afraid of losing what they have. So it’s easy to hit him.”

Prime suspects in the fall of Horie include enemies of Prime Minister Junichiro Koizumi, who has become the most successful politician of his generation by waging war on the vested interests in politics and business.

Koizumi recruited Horie for his slate of reform-minded candidates in last September’s general election, which the prime minister called as a surrogate referendum on his plans to modernize the economy. A nominally independent candidate, Horie failed to win a seat in parliament, despite Koizumi’s landslide victory.

But he remains close to members of Koizumi’s small inner circle, notably Tsutomu Takebe, secretary general of the ruling party, whose declaration during the campaign that Horie was “my brother, my son” has been replayed on TV in recent days.

Anticipating opposition attacks today, Koizumi tried to keep his distance from Horie. On Monday, even before the arrests, he told reporters that “if it’s a violation of the law, it is natural to handle the case strictly. Even in a new era ... it is important to follow the rules.”

Prosecutors have three weeks to charge him with a crime or release him. But whatever his personal fate, it seems unlikely the new breed of business he represented will fade away.

“There is such a generational gap in Japan,” said Nalin Advani, vice president of Solid KK, a Yokohama-based tech firm. “In my company, I have a bunch of guys Horie’s age who want to be rock stars. They want to be like Horie in their own way. I hope this doesn’t discourage them. I want them to be rock stars.”

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Hisako Ueno of The Times’ Tokyo Bureau contributed to this report.