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In what may be the fastest investigation and arrest in Japanese history, Takafumi Horie, the president of livedoor, was formally investigated and arrested for accounting fraud in only eight days.

The case started on Monday, January 16th when the Japanese media suddenly erupted with the news that the Men With Boxes were raiding livedoor's offices and carting off documents and computers.

Essentially livedoor is accused of two instances of cooking their accounting books to make losses look like profits and a third count of misrepresenting a takeover. In a nutshell, a holding company allegedly and secretly owned/controlled by livedoor purchased controlling interest in a publishing company. Later, another livedoor subsidiary named Livedoor Marketing announced publicly that it was going to takeover the publishing company. The prosecutors allege that LM represented the takeover as an outside stock purchase when it actually was an intra-group stock transfer although they are hard-pressed to explain exactly how this breaks the law other than a vague rule about spreading rumors and accusations of "exploiting loopholes". The motive for the deceit, however, is very clear: the publishing company's shares shot up in value, increasing livedoor's holdings and both livedoor and Livedoor Marketing were able to successfully pull off 100 for 1 stock splits.

Although the Japanese version of the SEC had been investigating livedoor for quite some time, there's a general feeling that there's something fishy with both livedoor and the sudden announcement and quick arrest. (Your humble editor's better half, Her Indoors, suspects it's an attempt to distract public attention from another on going scandal that could rock the Liberal Democratic Party's financial base and kill and maim thousands of people. More on that later.)

Television has been overrun with Old Guard Men In Suits tripping over themselves to smugly denounce the decrease in Japan's moral values and the evidence, clear to all, that Horie's "money games" were not in keeping with the spirit of Japanese business. NHK, the government's official mouthpiece, had all but convicted Horie before the Men With Boxes had even left livedoor's offices. They interviewed surprisingly well-briefed experts who spoke about "livedoor's lies" without any qualification. (They've recently begun adding "allegedly" to all accusations.)

As the story has unfolded, the chart's explaining the complicated transactions have become more and more, well, complicated and the pundits are becoming more and more hard pressed to explain the fraud. The basic argument is that complication=fraud and that any attempt to manipulate stock prices, however legal or loopholed, is wrong. The Japanese seem to have a natural distrust of the stock market even at its best. Finding and exploiting loopholes, therefore, is considered both greedy and unfair and, at minimum, against the spirit of the law.

There's also a tendency to sell the market as a kind of pristine entity. Your humble editor's favorite non-sequitor quote was from an alleged stock market expert who maintained that a stock's price ONLY "represented the quality of a company's products" and that, therefore, livedoor's sudden rise in value had to be proof of fraud as livedoor had no products. (He's obviously never heard about Mr. Market, the effects of marketing, or the internet.)

Almost immediately, the Japanese Stock Market went into panic mode and investors started shedding shares of everything as fast as humanly possible. The Tokyo Stock Exchange, which presides over transactions in the second largest capital market in the world, shut down as it is only capable of handling four million transactions in one day. (This after a series of embarrassing errors involving typographical errors that have cost them millions of dollars). The fall out has been described as "Livedoor Shock" but could best be described as "The Tokyo Stock Exchange is run by idiots." Livedoor stock is so volatile and heavily traded the TSE has limited its trading to only one hour a day lest it bring down the entire system, which can now handle FIVE million shares a day.

Horie has been arrested, along with his CFO and another high level employee, and is now residing in a detention facility just outside of Tokyo while the police question him. There was a beautiful moment on TV recently when a Japanese news program interviewed the CJT's beloved Muneo Suzuki about what it's like to be in jail. (Long term suffers will remember that Suzuki spent over 450 days in jail for various influence peddling schemes.)

Fuji TV is now considering either buying up livedoor or dumping it's free-falling livedoor stock. Keidanren, the Japanese Business Federation, has openly expressed regret for admitting livedoor. (This is apparently first time in the organization's history it's ever criticized an active member.) PM Koizumi has been embarrassed as Horie ran as an endorsed but unsupported LDP candidate against Shizuka Kamei in the last lower house election. LDP Powers-What-Are have been doing their best to explain how endorsement does not equal support.

The message in all this to any and all would be Horie's is "You have %#@$ed with the universal forces of nature Mr. Horie and you must ATONE!" In the final revenge, the 30-something t-shirt wearing Horie has been replaced as livedoor's president by a 60 year old man who wears a suit.
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In a scandal that threatens to engulf the Japanese construction industry and the Liberal Democratic Party, it was recently revealed that over one hundred condominium complexes and dozens of hotels and office buildings would have to be vacated and torn down as the architect and builders had left out little things like reinforcing walls and steel rods designed to keep buildings from collapsing during moderate earthquakes.

The buildings had all been designed by Tsutomu Aneha, and built by Huser (Human User Company), Kimura Construction and a handful of other oddly connected companies. Aneha claimed that he'd been pressured by the construction companies to falsify earthquake safety data and that a private "neutral" inspection company hired by the group (the government having deregulated, sort of, this part of the construction business) had looked the other way rather than actually double checking Aneha's math and designs. The construction companies, for their part, claim that when they were building the buildings they never noticed that Aneha's designs included only two or three reinforcing steel bars in each support pillar even though the law requires six.

Sensing the threat to one of their key financial bases, and plagued with images of families being tossed out of their homes while still holding the loan on the home, the LDP quickly convened hearings in which several of the key players answered Diet member's questions, although not under oath. The biggest character was Susumu Ojima, the president of Huser. He sported a loud suit and neck length hair swept back from an impressive widow's peak to a perfect fringe on the back. When he wasn't making slick sales-pitches to the committee, he grunted and yelled at the other witnesses and had to be told to shut up by the committee chair. He sat back smugly and acted very much like a man who knew his political connections would save him. At one point he even looked at someone in the diet and gave a knowing smile.

This backfired, however, when it was revealed that 1) A lower house Diet member named Ito had rushed Ojima to an emergency meeting with a representative of the Land and Transport Ministry a few days before the scandal broke, 2) Ito's son had been employed by Huser to manage a condominium complex, 3) a former upper house member named Anan lived in a Huser built condominium 4) a tape, made by condominium residents after the scandal broke, emerged in which Ojima claimed to have contacted several key LDP members including Chief Cabinet Secretary Abe, the current front-runner to replace Koizumi as Prime Minster and 5) the Japanese don't like people who make asses of themselves in the Diet.

Suddenly, Ojima appeared in public with short cropped hair that looked remarkably more gray than before. He started wearing glasses and his shiny tan suit had been replaced with a somber dark one. Focus moved from Aneha, despite the government's efforts to keep it on him, to Huser and the equally well connected Kimura Construction.

The scope of this scandal is hard to underestimate as there's a feeling among the public that it reaches much deeper and much broader than just one group of architects and construction companies and endangers thousands of lives. Many people in Japan are now investigating whether or not they live in unsafe housing. As the government forces families to vacate their newly bought condos, the companies are promising to buy back all the units. However, your humble editor suspects bankruptcy is on the horizon for Huser et al and the families will be stuck with big loans and no homes. Also, given the LDP's deep connections to the construction industry, it is only a matter of time before Diet members start falling.

Faced with such a strong public reaction, Aneha was called before the Diet and put under oath. On Tuesday, January 17th, Ojima was scheduled to testify under oath. By colossal coincidence, prosecutors raided livedoor's offices the evening of January 16th. For a few days it looked as if the media might be able to sustain both stories. News programs on Tuesday opened with 10 minutes about Horie followed by 10 minutes about Ojima. Of particular interest regarding the latter was his demeanor: he wore the dark suit and glasses and sported a black tie, which is usually reserved for funerals. What's more, he walked and spoke as if he were recovering from a stroke. In his hand, he clutched a string of black Buddhist prayer beads. He invoked his right not to testify on every other question, even regarding things he'd already discussed openly on TV. (The chairman actually yelled at him about this.) Similar to Oliver North, he'd have three minute discussions with his lawyer before answering a yes or no question. (The chairman yelled at him about this, too.) Also, excerpts of Ojima shouting down condo owners who persisted in asking him questions about the fraud and how he would pay them back were made public. (This was the tape where he claimed to have met Abe.) To its credit, the Japanese public recognized the extreme transformation for the sham it was/is.

The dual news focus lasted until Horie was pulled in for questioning. Now that he's been arrested, the only other news story to get any coverage is of a 57 year old man with a harem of 10 young and attractive wives. That story is actually close to driving Horie off camera. (More, ahem, on that later...)
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Since the middle of December, delicate falling snow has unleashed havoc all over the Japan Sea coast side of Japan leaving over 100 people dead and over 2000 people injured in snow related accidents.

Niigata, nicknamed Snow Country, has been particularly hard hit. The village of Tsunan got almost 12 feet of snow in only three weeks. A village that straddles the Nagano/Niigata border near Tsunan was completely cut off from the outside world thanks in no small part to the fact that the clearing crew the township hired cleared about half the road then gave up.

The township and the prefectures responded to the crisis by holding impressive meetings where all the men were dressed in work clothes but no one was actually working (We must first decide if it is necessary to work. We are sure the villagers would rather sacrifice their own lives than those of others. They can eat the dead to survive, etc.) At one point the Minister of Something Or Other visited Tsunan, looked around, said something pithy along the lines of "That's a lot of snow" then got back in his 2005 Toyota Crown Zero and headed back to Tokyo where it's been brutally cold but didn't snow until last week.

In the end, the ground self defense force was called in and they approached the snow cautiously, taking nearly three days to open the road. Once the road was open, Land and Transport Ministry officials returned, looked around and decided that the road was still too dangerous, and could only be opened for an hour each day.

The snow was followed by heavy rain that triggered dozens of impressive avalanches.
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After the recent landslide election, Koizumi's assassins and parachute candidates wasted little time embarrassing themselves and him.

First, a 25 year old man named Taizo Sugimura, who only weeks before had been making minimum wage as part-time worker, erupted in glee at the amount of money he'd now be making. "25 million yen? (about 217,000 dollars) 25 million yen? I couldn't believe it when they told me!" He said he might buy a BMW. The Powers What Are in the LDP quickly slapped him down as the first rule of Diet Club is you do not talk about Diet Club. (For the record, the second rule of Diet Club is, if you do talk about Diet Club, for God's sake don't mention the money. In fact, this is the first time your humble editor remembers ever hearing how much money Diet members make.) Sugimura quickly apologized and has been much more cautious with the press.

Yukiko Fujino, a financial advisor and one third of the Madonnas, was reprimanded for attending a talk show instead of a major session of parliament. Her defense that the talk show had been scheduled before her election fell on deaf ears and she was forced to apologize. A second Madonna was selected to the cabinet and she turned up for the group photo in an puffy blue dress that literally glowed and looked like a bad bride's maid dress made from one of the ubiquitous blue tarps drunks lounge around on during cherry blossom season.

Koizumi for his part has been attempting to change the LDP from a factional system to a regional system. First, he encouraged his Kids to refrain from joining any of the traditional factions. (As of this writing about half have joined factions and the rest have formed their own "study group".) Second, he has been working to expand his power over the regional LDP by seeking permission to dissolve regional chapters without the chapter being able to appeal. This is to punish LDP chapters that supported the LDP rebels in the last election.
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Now that the Japanese economy has shown clear signs of a sustainable, if not permanent recovery, the Japanese government is swiftly moving to crush any hope of future growth by removing the reforms that created the recovery.

Because the long anticipated (and unspecified) sales tax increase is promised/threatened to go into effect only after Koizumi leaves office, the government is currently content merely to raise taxes and cut benefits across the board.

First, the government is "bringing fairness" to the system by abolishing the three-tiered tax system on beer and beerish products. Taxes on beer will be lowered while taxes on happoshu (alcoholic, beer-flavored soda water) and beer-like products made from soy-beans and vegetables (alcoholic horse urine) will be raised. The result, of course, being a net tax increase.

Second, pension benefits will both be cut and the eligibility age pushed back, leaving a potentially frightening gap between mandatory retirement and benefits depending on the company a retiree worked for. There's also quiet talk about raising the national health care deductible from 30% to 40%.

Finally, there's your humble editor's favorite tactic: raising tax revenue without raising taxes (r.e. Ronald Reagan). Because the phrase "Raising taxes on salaried workers" sparks unpleasant and unenthusiastic protests among the public, the government will instead refer to such actions as "lowering deductions." The reasoning is that because the economy has recovered, the emergency tax deductions implemented to help the economy recover can be eliminated. The result is that a family of four with a 7,000,000 yen ($61,000) annual income will pay an extra 80,000 yen ($700) in "lowered deductions" next year.

When asked about what reforms the government, for its part, would do to help cut costs and eliminate waste, the government merely smiled, winked and said "We'll call ya."
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Faced with the fallout from several scandals that have resulted in, at last count, 1,300,000 households refusing to pay the NHK fee (a loss of between 176-271 million dollars a year), the Powers What Are at NHK, after careful soul searching, have decided that the network needs to "reform to restore public trust and to save subscription based television."

The preferred method of reform is, of course, to sue those who don't pay.

Of course, NHK doesn't call it "suing;" instead, it refers to it as "restoring fairness to the subscription system by dealing by dealing with those families who don't pay" by taking non-paying subscribers to court. (For the record, NHK is "subscription based" in the same way that property taxes are "subscription based:" If you didn't want to pay the tax, why did you buy the property?) Also, as mentioned on the CJT Guide website, although paying the NHK fee is the law, there is no specified punishment for not paying the fee.

Fortunately, especially for your humble editor, the threat of lawsuits seems to have diminished as the scope of the "unfairness" has grown. (Translation: NHK would waste more on 1,300,000 lawsuits than it could possibly make.) NHK is finally considering alternate ideas: reducing the monthly fee; further reducing the fee for workers who, for various reasons, have a second home and therefore have to pay the NHK fee twice; televising shows that don't suck; hiding the fee along with other income taxes, etc.

NHK is also firing 2,200 workers and getting better control over its internal financial controls. It turned down a government panel's suggestion to scramble the signal to any house that doesn't pay (because the Powers What Are must realize that probably 90% of Japan would happily accept scrambling,) but it does seem much more open to ideas. It even modified its geriatric Red And White New Year's Music Festival and produced a surprisingly entertaining evening that got its best ratings in years.

Despite this your humble editor maintains his standard position toward NHK : Can't Pay. Won't Pay.
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Long term sufferers of this institution will remember that part of the reason Muneo Suzuki went to jail was his unhealthy realationship with the Foreign Ministry. Well, with the return of Muneo Suzuki to the Diet, the Foreign Ministry has printed an entire set of instructions about how its workers can and should talk to Suzuki and about what reports to fill out if they do talk to him. The book is dubbed gThe Muneo Manual.h

In a case of party-pooping second only to Graham Chapman dying on the eve of Monty Python's 20th anniversary reunion, takeover artist Yoshiaki Murakami of the Murakami Fund announced he owned 38% of Hanshin Railway only hours after the Hanshin Tigers baseball team qualified for the Japan Series. He implied he might sell the team or at least spin it off as a individual entity. The disruption is blamed, in part, for the Tigers subsequent humiliation.

Former New York Mets Manager Bobby Valentine led the Chiba Lotte (Candy Maker) Marines to their first Japan Series victory in 31 years. This is sweet revenge for Valentine who was fired after one season from the Marines a decade ago, despite a good record, thanks to political maneuvering by his back up staff who convinced the owner they could have done a better job. By colossal coincidence, the Marines didn't have a winning season until Valentine came back. Despite finishing 4th in his first season, he worked on developing younger players and confounded opposing teams this season by using 129 different batting orders in 136 games. He also benefited from a playoff system that only his league has and that kept his team sharp while the Hanshin (Railway) Tigers sat around for almost three weeks without playing a single game.

A humbled and substantially less lesbian t.A.T.u made a return to Japan. They made and ate mochi on UTABAN (one of the music shows that still allows lip-syncing) and made a sincere effort to look sincere and interested where ever they went.

In sumo news, Mongolian yokozuna Asashoryu broke almost every major record in sumo last year by winning seven basho in a row, including all six basho in 2005, and by winning 84 of 90 matches in 2005. When he took the money envelopes after the last match of the last basho, he was in tears prompting one of your humble editor's favorite analysts to say "there's no crying in sumo!" (Or something like that.) Also, Bulgarian Kotooshu became the first white boy/European to be promoted to ozeki. Both stank up the recent new year's basho.

The aforementioned Red And White New Year's Music Festival got a much needed face lift by bringing in outside emcees and front-loading most enka music to the period of time that most enka fans are actually awake (any time before 9:00 p.m.) There was also a much better mix of music, including a Madonna wannabe whose act is so sexy NHK was afraid they'd have to cut away to something else.

Finally, a 57 year old man was arrested this week after a woman accused him of threatening her if she didn't become one of his wives. It turned out the man had 10 wives, most in their early to mid-20's. Because the man is, by his own admission, bald and bug eyed (imagine Uncle Fester) the police suspect foul play and have removed from the home books on hypnotism; books on how to kill people; a stun gun and a portable tear gas canister.
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Revenge Of The Suits | Houses Built On Sham | Snow Country Blues | Koizumi's Kids | Read My Lips | You Can't Refuse | Ends And Odds

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Created January 2006
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