I previously blogged about Japanese Internet entrepreneur Takefumi Horie, discussing how his brash, aggressive tactics riled Japan's traditional business elite while winning admiration from many in the younger generation.Well, in Japan it's often said the the nail that sticks up gets hammered down. And in one of those stories (like the Aneha construction scandal) that I never really got around to blogging about, Horie has been getting hammered hard since mid-January, when Japanese prosecutors raided the offices of his company, Livedoor, looking for evidence of securities law violations.
Horie was eventually arrested on an assortment of charges, including using misleading information to pump up the share price of a Livedoor subsidiary and falsifying some accounts.
In the past, Horie had been criticized for unconventional business tactics like acquiring shares in a takeover target in after-hours trading, or for using aggressive stock splits to "drive up" Livedoor's share price (a rather silly accusation, as I discussed here.) But none of that was illegal. This time, the powers that be finally found a crime to pin on him. Livedoor's stock has plunged 85% since the raid, and Horie, who previously lived in a luxury apartment in central Tokyo, has been sitting in a tiny jail cell. (And in perhaps the ultimate indignity, he hasn't been able to update his blog since January 22.)
Horie is neither a dangerous criminal nor an obvious flight risk, so you may be wondering why he needs to be confined under harsh conditions while awaiting a possible trial. Well, as the Economist explains, the Japanese criminal justice system works quite differently from what Americans have come to expect after years of Law and Order reruns:
Because [the Japanese police] do not like to be proved wrong, and because prosecutors press ahead only with cases that are built upon confessions, both groups take full advantage of their sweeping powers to persuade suspects to talk. They can hold suspects for up to 23 days, for example, without charging them. Research from the United States suggests that most suspects cannot hold out for anywhere near that long without offering a confession, genuine or not.These tactics work. Once a case goes to trial, it's as good as over: Japanese prosecutors have a conviction rate above 99%.
In Japan, moreover, suspects enjoy only limited access to their defence lawyers during this long confinement. Although the constitution grants defendants a right to counsel, that right means little in practice until a formal indictment occurs. The police routinely restrict access to defence lawyers during the holding period, while taking the opportunity to question suspects frequently.
So the cops want Horie to confess. The only problem is, as the Yomiuri Shimbun reports, he's refusing to play along:
As the period of detention for former Livedoor Co. President Takafumi Horie was extended by 10 days Friday, he continued to deny allegations that he broke the Securities and Exchange Law.Of course. By not confessing — by stubbornly maintaining his innocence — Horie is refusing to play his part in an age-old ritual. As the accused, Horie is expected to admit his guilt and apologize; only then can he be accepted, humbled and chastened, back into society. But just as Horie the businessman took the Western approach of cleverly exploiting the rules to their fullest possible extent, Horie the suspect is taking the Western approach of actually forcing the prosecution to prove its case. I tell ya, the guy has some nerve.
A prosecution source said: "His denial is within the scope of our assumption. It's possible to prove his conspiracy with other executives [to break the law]."
But investigation sources said the prosecutors seemed to be fighting a hard battle with Horie, 33, in the interrogation room.
I don't know whether Horie is guilty. But I have a sneaking suspicion that prosecutors could dig up evidence of wrongdoing by a great many, if not most, Japanese companies if they were so inclined. And I know that a civilized justice system cannot be built on coerced confessions.
This is a really interesting story, GB, and I hope you'll keep us up-to-date on it.
As far as Horie goes, isn't this like so many of the scams that occured in the tech sector in America a decade or so ago. Pyramid game stuff. Accounting done by Worldcom and Enron disciples. And worse. Looks like he might've been laundering bad guys money, shady swiss bank accounts, stuff like that.
If Horie is guilty of Ebbers/Skilling/Fastow-type accounting, then he should go to jail. I would still say that coerced confessions, esp. when the accused hasn't committed the acts he or she is confessing to, are wrong. My original point remains: if talented young Japanese "technocrats" get a sense that doing business in their home country could, should they run afoul of the establishment, lead humiliation and jail time, then it could be quite detrimental to long-term economic recovery. Political crackdowns have led to "brain Drain" in less dynamic environments than Japan, and must be avoided if Japan wants to compete in the global marketplace.
And the same young technocrats should be thrilled that Horie is going to jail if it turns out Livedoor was engaging in "Ebbers/Skilling/Fastow" accounting. And worse. I don't know G.B., seems that you had a bit of a crush on this guy, and now it is Horie versus the evil establishment and you even went so far as to throw in "the nail that sticks up" meme. His case has become an ink blot upon which you project all sorts of stereotypes and lecture Japan on the dangers of political crackdowns and what they need to understand about competing in the global world. Jeez. Bad day at work? Why not study up on the charges, which have been laid out in great detail in the thoughtful parts (limited I know) of the Japanese media, and let your readers in on the facts of the case as it is developing, as opposed to this kind of cheerleading and moralizing in thin air. Even Horie's staunchest defenders admit he cooked the books and has done wrong. They merely argue about the degree of wrongdoing, not about the fact that wrong has been done.
The young types I meet whose future you seem so concerned about, those that are in business and are keeping abreast of the situation, tell me Horie is Worldcom 2. And worse. And they are very happy his scam is just about over and angry as hell at the media and politicians who held him up as some kind of breath of fresh air for Japan.
But as a general rule, I do think that enemy combatants who are taken prisoner should enjoy something less than the full panoply of rights and protections a country extends to its own citizens in a criminal trial.
Horie may well be guilty. Indeed, based on the media coverage, you'd think he had already been convicted. And to the extent he broke the law, then yes, he deserves to be punished. But I think it's highly likely that he came under scrutiny in the first place because of his brash attitude and unconventional tactics, and I think it's noteworthy that he's taking the same approach as a criminal suspect.
In my judgment, a step-by-step, technical documentation of the charges against Horie adds nothing to this basic observation.
I too liked Horie. But what I liked, what you call his brashness and unconventionality, now appears, with great certainty, to have been part of the scam. And very calculated. Fortunately, there are plenty of brash and unconventional and lawful young Japanese entrepeneurs who will step up and who I can like with a clear conscience. They benefit the most from Horie's vigorous prosecution.
Anyway, I enjoy your blog and didn't mean to imply you should be running it in any way except the way you want to; merely that the case against Horie seems to be quite strong and your readers might be interested in facts as well as atmospherics. I doubt if Worldcom or Enron ever got this kind of blog love.
I think a vigorous prosecution, together with a vigorous defense, is a good idea. The problem is that in Japan's criminal justice system, the prosecution is often quite lazy, preferring to rely on coerced confessions rather than actually building an airtight case.
As for the dead right-hand man, the official word is that he was not murdered. Here's the Kyodo News report:You may be doubt the NPSC on this one, but it seems unfair to suggest the death was a murder without any basis beyond sheer speculation.
Again I take your points with regards to the justice system to heart. Believe me I share your concerns and have had occassion to act upon those concerns. On the whole though, I think the impression you leave is that admittance of guilt is somehow by definition the result of coercion or prosecutorial laziness. Or that a vigorous defense is not a right granted to the accused. I would argue that this is more stereotypical than factual. Just a brief point, most confessions occur at the time of arrest. "You did such and such right?" "Yeah." "Okay." "I'm sorry." I find this in many ways more civilized than the opposite: a system of justice that even when guilty one must never admit one's guilt. As I posted above sentencing is relatively light. Though if you cross a line a chasm exists. If you kill someone you in turn might hang.
The tragic suicide was also, it seems, not the reaction to a lazy, half-assed fishing expedition, but the result of being confronted by the police with a plethora of facts pointing to serious breaches of ethics and the law. He was then let free. While you may bemoan Horie being locked away for a few weeks, I wish that this young man had been kept under closer watch. He might still be alive.
Your point about needing an airtight case, and not being lazy, is also agreed to, and I think the system here can lead to the very problems you address. Which is why I'm having a hard time understanding why you aren't applauding the authorities, who by all accounts have gone very slowly in building up the case against Horie, then executed a lawful warrant and now that they have found exactly what they thought they would find, and those in Livedoor are telling them what they suspected was in fact true, seem to have as strong a case as can be imagined.
I for one would rather save the usual memes against the Japanese justice system for cases where they actually fit the facts. Such cases do exist. This is not one of them. Imho.
I agree with some of E's observations about the differences in justice systems, but this criticism of the US seems misdirected: "this a system of justice that even when guilty one must never admit one's guilt." Aren't you really talking here about our civil tort system, which handles private litigation and not criminal trials? With that correction, I think you're right.
I was also thinking of criminal trials. But you may now better about this than me. I will only once again say that I think the "lazy" complaint is usually, in fact almost always, not the case. Though I too believed this before seeing things more close-up. I've been pleasantly surprised at the amount of time and detail that has been taken by the police in the most mundane cases before someone was actually arrested. That it was a fait d'acompli was due to the incredible attention to detail and the willingness not to arrest someone for months on end as more evidence was gathered though much, I dare say sufficient, evidence already pointed to their being guilty at a very early period in the investigation. Such is often not the case in America, where the court system often sorts out the strength of cases after the fact of an arrest. Where cases are further developed after someone is arrested. Being arrested has much more meaning in Japan, thus I would argue it is an act not taken lightly at all. Neither by those who arrest nor by those who are arrested. Personally, having done something wrong I prefer a system where I would be rewarded for and expected to 'fess up and apologize. And if I didn't do something wrong I'm not sure the Japanese system is scarier for me than the U.S. system. I think both systems are flawed and both do a fairly good job. I also think both systems need their tails always held to the fire. My real difference with GB is more strategic than substantive. I think the Horie arrest, in fairness, deserves praise; and there are better cases which fit into his thinking about the justice system here that deserve our censure. He seems to think this case is fitting for such censure. I think the opposite. A few years from now we'll no doubt have a better sense of what went on. If wrong I'll happily treat GB to a night in Gion. Tokyo Tom too. Sorry for hogging the thread. Cheers.
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