Questions increase over Livedoor business practices

The scope of alleged wrongdoing by Japanese Internet portal Livedoor has widened since initial reports following a raid by public prosecutors on the company’s Tokyo headquarters on Monday.

At that time, local media reported the company was under investigation for possible irregularities related to a single acquisition it made in 2004 and a financial report. However, by Friday this had grown to possible wrongdoing related to six acquisitions.

To date, public prosecutors haven’t specified the reasons why the company is under investigation. Livedoor said an internal probe found no evidence of any wrongdoing.

No matter though, the flood of accusations made in local media reports has been enough to send stock in Livedoor and related companies plummeting this week.

On Monday, before the raids began, Livedoor stock price stood at ¥696, but by Friday it had fallen to ¥336. Other companies in the group suffered similar stock price drops, including Livedoor Marketing Co. Ltd., which saw its shares drop from ¥6,150 on Monday to ¥3,150 on Friday, and Turbolinux Co. Ltd., in which stocks fell from ¥429,000 to ¥239,000 in four days.

Late Thursday, Livedoor also reported that one of its directors, Yoshiaki Yamada, had resigned from its board. Yamada is also an executive at Fuji Television Network Inc., a major Japanese broadcaster that last year announced a tie-up with Livedoor as part of a deal brokered to end a takeover battle the Internet company had launched against a Fuji TV affiliate.

The two companies said at the time that they would work together on bringing Fuji TV content to the Internet via Livedoor’s group Web sites. That deal now appears in doubt after Yamada’s resignation.

The growing scandal has also taken a toll heavier than lost money.

On Wednesday, Hideaki Noguchi, vice president of HS Securities, was dead found in a hotel room in Okinawa, southern Japan. He is said to have committed suicide, according to reports. Noguchi had worked at On The Edge, the predecessor of Livedoor, and HS Securities was an advisor to Livedoor on some of its business, local media said. HS Securities was also raided by prosecutors in relation to the Livedoor investigation, it said in a statement.