Japanese Trade Union Confederation (RENGO)

Rengo’s statement on the Arrest of CEO Takafumi Horie and Other Executives of the Livedoor Group for Alleged Violations of the Securities Transaction Law

1. CEO Takafumi Horie and other senior officials of the Livedoor Groupwere arrested on January 23 for alleged violations of the SecuritiesTransaction Law. While the investigations are still ongoing, the suspectedare said to have committed fraudulent transactions and to have spreadfalse information regarding acquisitions in an attempt to raise the stockprice of Livedoor Marketing, one of the Group’s companies. At the sametime, investigations have been proceeding into alleged account-rigging inLivedoor financial statements for the fiscal year ending in September 2004,and it is likely that other illegal activities committed by the suspectswill be uncovered.
   
   
   
2. The business strategy pursued by Livedoor, which led to the allegations,is characterized by raising the company’s own stock prices through radicalstock splits, followed by the implementation of acquisitions throughstock equivalent exchange techniques using the rigged value of theirown shares as collateral, bringing about an expansion of the Group’sbusiness. The attempted takeover of Fuji Television Network, Inc. byLivedoor last year, making use of off-business hour stock market transactions,is said to have freely used an approach that narrowly complied with marketrules, whilst investigations now going on have made everyone understandthe fact that the business setup of the Livedoor Group is basically thatof a speculator engaging in money game, and therefore lacks a core business.
   
   
3. Livedoor’s business strategy of pursuing the growth of the total valueof its own stocks through transactions centered on acquisitions in thefinancial and stock markets, where there are no consumers, symbolizesthe danger and weak points of the economic and fiscal management carriedout by the ruling government and the coalition government parties thathave abandoned a secure, safe and stable economic society centered aroundpeople, and that have brought about polarization and widening economicdisparities by pursuing the dogma of the almighty market and the principleof self-responsibility. We must vigorously pursue the responsibility of thegovernment and the coalition parties that have created the conditions thatled to this and other corporate scandals. Prime Minister Koizumi’s LiberalDemocratic Party is particularly guilty, because it applauded Horie as arepresentative entrepreneur of the new era brought into being by the KoizumiReforms, strongly pushed Mr. Horie as a candidate for a seat in the Houseof Representatives in the general election last September, made him a heroof the “Koizumi Theater” and as a result won a great victory in the LowerHouse election.
   
   
4. JTUC-RENGO has expressed concern about the tendency in society to gaugecompanies simply by their stock prices, and to buy and sell businessesthrough money games. It is true that stock prices provide a key indicatorfor assessing the performance of a company, but it is wrong to judgethe value of an enterprise solely through its stockholders’ equity. Takingthe opportunity of the Livedoor scandal, we emphasize the fact that thevalue of a business can only be realized by the employees working there,and it is not true that a business exists for the sake of its stockholdersalone.
   
   RENGO will continue to dedicate our efforts to rectifying the currentexcessive deregulation and the dogma of the almighty market, and at thesame time persuading the government to make a policy shift toward buildinga “welfare society centered around labor,” which rewards every workerwho works diligently.