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JAPAN: Livedoor shares suspended after new allegations

January 17th, 2006

The Tokyo Stock Exchange suspended trading in shares of Livedoor Co. on Wednesday after media reports that the Internet company, which was raided by prosecutors on Monday, had tampered with its earnings reports.

The exchange took the action after the Mainichi newspaper reported that Livedoor had changed details in its report for the year ended September 2005 while the Yomiuri newspaper said the company had falsified part of its report for the previous year.

Prosecutors raided the company on suspicion of securities law violations late on Monday but authorities have not officially disclosed details of their investigation.

The raid triggered a 2.84 percent drop in the Nikkei share average on Tuesday, its biggest percentage loss in nine months.

Livedoor shares failed to trade on Tuesday due to a huge glut of sell orders but were quoted down 14.4 percent, the daily limit. Before the suspension on Wednesday, the stock was quoted down 17 percent in the pre-market.

UBS Warburg said in a research note on Tuesday that it had put its "buy" rating on Livedoor under review.

According to media reports, Livedoor and a group company are also suspected of illegally profiting from a deal that had been announced as an external acquisition but which in fact was an internal transfer of shares.

Sources familiar with the matter said the investigation by prosecutors and securities regulators centers on the acquisition in 2004 of a publishing firm, Money Life, by a predecessor of Livedoor Marketing, a separately listed subsidiary.

Livedoor, known for its rapid growth and aggressive acquisition strategy, has so far declined to comment on specific allegations but has said it is conducting its own investigation and was cooperating with authorities.

Livedoor's maverick chief executive, Takafumi Horie, has made many enemies in Japan's staid corporate and media world with his "bare-knuckled" business practices and brash personality.

The T-shirt-clad entrepreneur emerged as a media fixture in 2004 when he launched a bid to buy a professional baseball team.

He then shook Japan's conservative broadcast industry last year when he tried to take control of the sprawling Fuji Sankei media empire. Both attempts failed.

He also ran for parliament in a general election last September but lost to an old-guard incumbent.

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