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LEAD: Livedoor gets 5.6 bil. yen on share sales in 2 bogus swap deals+(Japan Economic Newswire Via Thomson Dialog NewsEdge)TOKYO, Feb. 23_(Kyodo) _ (EDS: ADDING FRESH INFO) Livedoor Co. obtained 5.6 billion yen in proceeds from the sales of new Livedoor shares it issued in March 2004 under the pretext of swapping them with shares in two firms it was targeting for takeover, prosecution sources said Thursday. Of the proceeds, Livedoor used 3.7 billion yen to window dress its group financial statement for the business year to Sept. 30 that year, according to the sources close to a special investigative squad of the Tokyo District Public Prosecutors Office. The two takeover targets were online financial service firm Webcashing.Com Co. and cellphone sales firm Kurasawa Communications Co., the sources said. Kurasawa later changed its name to Livedoor Mobile Co. The figures of the allegedly ill-gotten proceeds came to light a day after former Livedoor President Takafumi Horie and three other former executives were served with fresh arrest warrants on suspicion of cooking the books for the business year in breach of the Securities and Exchange Law. Former Livedoor Representative Director Fumito Kumagai was also arrested Wednesday for the same allegations. The Tokyo prosecutors allege Horie and the four others added 5.35 billion yen to the group's earnings results for the year by posting bogus sales to two of Livedoor arms and by issuing new Livedoor shares under the pretext of swapping them with shares in target firms, including Kurasawa Communications and Webcashing.Com. The 3.7 billion yen proceeds in question were used as part of the 5.35 billion yen, the sources said. The investigative squad is pressing the five to explain the allegedly illicit transactions involving the bogus sales and the new share issues, they said. The sources said Horie and the other former Livedoor executives had devised and implemented a plan to enter a large consolidated pretax profit figure on the financial report for the business year. Under the plan, Livedoor announced in late 2003 it would acquire Kurasawa Communications and Webcashing.Com via share swaps on March 15 the following year. But it had actually arranged for investment partnerships it controls to buy the targets with cash beforehand, with an eye to making the partnerships recipients of a total of 1.39 million Livedoor shares, including the shares it issued under the pretext of exchanging them with the targets' shares, they said. Then, Livedoor had the partnerships sell off those Livedoor shares to the market after channeling them via overseas financial institutions and other investment partnerships, thus obtaining the 5.6 billion yen proceeds, they said. Net proceeds from the shares sales after commissions were 4.0 billion yen, they said. The net proceeds were then transferred back to the Livedoor side through a range of bank accounts in locations such as Switzerland and Hong Kong, the sources said. Of the proceeds, Livedoor then booked in stages the 3.7 billion yen as sales on its group financial statement for the year. The fictitious sales figure was booked in three separate amounts of 800 million yen, 1.45 billion yen and 1.46 billion yen, the sources said. The remaining 300 million yen was booked as items other than sales on the financial statement, the sources said. Japanese companies seeking to launder money or evade taxes sometimes use foreign financial institutions to do so since they are beyond the direct reach of Japanese authorities. Some companies use overseas accounts opened under the names of dummy companies and then register the names of some board members or collaborating shareholders as the front company's board members. "In cases where companies use bank accounts opened under the names of such collaborators, the companies can relocate money without making their identities known to outsiders," a financial consultant said. |