Executive Linked to Livedoor Scandal Commits Suicide
Adding to Japan’s Livedoor stock scandal was the suicide of Hideaki Noguchi, vice president of H.S. Securities Co., which was raided along with Livedoor by Japanese Securities & Exchange authorities this week. Noguchi reportedly slit his wrists in a capsule hotel located on the Japanese tropical island of Okinawa.
The Associated Press reports “Noguchi is a former employee of On the Edge, the predecessor of Livedoor, which is at the center of a widening investigation that triggered massive selloffs on the Tokyo Stock Exchange on Tuesday and Wednesday. The market recovered some by midday Thursday.”
“We believe there wasn’t anything wrong,” H.S. Securities President Hideo Sawada said in a news conference. “We find (Noguchi’s suicide) regrettable and feel a heartbreaking grief.”
Offices of Livedoor, one of Japan’s largest web & search portals, which operates both online and in ‘brick & mortar’ establishments, were raided earlier this week in Tokyo’s Roponngi Hills.
Here’s a rundown of what Livedoor, which is in danger of being delisted from The Tokyo Stock Exchange, is in trouble for (provided by the AP) :
* Reports have claimed that Value Click Japan Inc., the predecessor of a Livedoor subsidiary, provided false information during its takeover of Japanese publisher Money Life in 2004.
* Livedoor allegedly concealed the fact that it already owned Money Life through an investment fund subsidiary of the Livedoor group, according to the reports.
(Livedoor later denied those claims Thursday, saying the investment fund was not part of Livedoor.)
“(Livedoor and the fund) have different operating officers. So we deemed it inappropriate to include the fund in our consolidated earnings report,” the company said in a statement submitted to the Tokyo Stock Exchange Thursday.
* Media reports have also said Livedoor is suspected of concealing a 1 billion yen (US$8.7 million; euro7.1 million) loss for full-year results ending September 2004, among other allegations.
Again, to add a foundation to the importance of this news on the search community, here is my simplified explanation of Livedoor.
How can one explain Livedoor to the US market? Imagine Yahoo or Google. But instead of Yahoo sending its Yahoo Auto users to a company like Carmax or users looking to purchase concert tickets to Ticket Master, Livedoor would acquire Carmax and rename it Livedoor Autos, and then perform a hostile takeover of Ticket Master.
Hence, if you walk down the street of major cities in Japan you may see brick and mortar businesses like Livedoor Insurance or Livedoor Auto, all connected via the uber-popular Livedoor portal.
Therefore, a US equivalent to the raiding of Livedoor by Japanese Securities and Exchange officers may be (and this is just a fictional example) Google, Yahoo, or Microsoft being raided and Bill Gates or Larry Page’s homes being ransacked. And then multiply the effect on the economy, businesses, and media by 1000%
The scandal has led to a downward slide of major Japanese stocks (although the Nikkei is up a bit today) and the slight weakening of the yen in trading against the US Dollar & the Euro. Given the global market’s reaction to the Livedoor scandal, I’m still going out on my limb as an amateur economic analyst and do believe that the recent falls in Yahoo & Apple do have some non-linear connection to the Japanese Tech Stock scare & Livedoor trading.