6TH LD: Ex-fund manager Murakami gets 2-yr prison term for insider trading.

TOKYO, July 19 Kyodo

(EDS: RECASTING)

Yoshiaki Murakami, a former investment fund manager regarded as heralding the arrival of a more freewheeling style of capitalism in Japan, was sentenced Thursday to two years in prison and imposed a fine of 3 million yen and a record 1.15 billion yen surcharge for insider stock trading in 2004 and 2005.

The Tokyo District Court ruled that Murakami, 47, violated the Securities and Exchange Law. The defense team for Murakami, who pleaded not guilty, immediately appealed the ruling.

Murakami made a profit of 3 billion yen for his fund by buying and then selling shares in Nippon Broadcasting System Inc. after Internet and financial services firm Livedoor Co. gave him insider information that it was planning to purchase a large number of the AM radio broadcaster's shares, the court said.

Presiding Judge Kunihiko Koma said in handing down the ruling, ''(Murakami) deceived general investors and undermined confidence in the securities markets by obtaining a massive profit through illegal measures...(He) has never expressed remorse and has done nothing but make irrational excuses.''

The ruling said that a prison term without suspension -- a rather harsh sentence for a defendant charged only with Securities and Exchange Law violations -- is appropriate as the crime was ''vicious'' and was committed by ''a professional fund manager.''

Murakami, who had been released on bail, was held in custody immediately after the ruling. His lawyers applied for bail again and Murakami was released on a bond of 700 million yen.

Since Murakami had already paid 500 million yen when he was prosecuted in June last year, he paid the balance of 200 million yen on Thursday.

The Tokyo District Public Prosecutors Office had sought a three-year prison term for Murakami as well as a fine of 3 million yen and a surcharge of 1.15 billion yen. The surcharge is the highest amount ever sought or imposed for an insider trading case in Japan.

According to the ruling, Murakami, a former trade ministry bureaucrat who became a high-profile shareholder activist and founder of the Murakami Fund, bought around 1.93 million additional shares in Nippon Broadcasting from Nov. 9, 2004, through Jan. 26, 2005, for 9.95 billion yen.

The purchase took place after the management of Livedoor informed him during a meeting on Nov. 8, 2004, that it was planning to purchase a large number of shares in Nippon Broadcasting, the ruling said.

Murakami then sold nearly 5 million shares in the AM radio broadcaster with the Murakami Fund gaining a profit of about 3 billion yen and Murakami personally gaining at least 150 million yen in the transactions, the ruling said.

The ruling said Murakami had abused his position as a fund manager and activist shareholder and had first encouraged Livedoor in its actions.

Livedoor bought a large number of the broadcaster's shares in February 2005 in a failed attempt to gain influence over the Fujisankei Communications Group, which encompasses Nippon Broadcasting and Fuji Television Network Inc., one of Japan's biggest private TV broadcasters.

The court acknowledged that Livedoor made the decision about the purchase and began raising funds after Murakami urged it to purchase the shares on Sept. 15, 2004, and that Livedoor informed Murakami of its decision to purchase the shares at the Nov. 8 meeting.

''As a fund manager, the defendant became a major shareholder using a massive amount of funds and subsequently acted as a shareholder activist, creating a situation where he received insider information,'' the presiding judge said. ''Then, using a large amount of money, he continued to buy more shares, taking advantage of a position no ordinary investor could obtain,'' he added.

''Rather, (Murakami) coaxed Livedoor executives into saying they would purchase the Nippon Broadcasting shares, instead of accidentally hearing it (as Murakami had argued),'' he said.

Murakami admitted the allegations soon after his arrest in June 2006 but later denied all the charges.

The district court said both his original confession during the investigation and testimony by Livedoor executives that they provided him with the insider information were ''highly credible.''

Both Murakami and Livedoor founder Takafumi Horie have denied that Livedoor passed on the insider information during the November 2004 meeting, while the defense had claimed that Murakami did not believe Livedoor could raise the necessary funds to buy the stock at that time.

But other Livedoor executives, including Ryoji Miyauchi, Livedoor's former chief financial officer and once Horie's right-hand man, have said insider information was disclosed.

Miyauchi, 39, has received a prison term for his role in accounting fraud and other securities law violations by Livedoor along with Horie.

The court also imposed a fine of 300 million yen on MAC Asset Management Inc., the core of the Murakami Fund, as demanded by the prosecutors. The entity had denied the insider trading charge.

The Murakami Fund, now virtually defunct, attracted market attention after suddenly emerging as a large stakeholder in major Japanese companies including Hanshin Electric Railway Co. and department store operator Matsuzakaya Co., and for urging executives to raise corporate value for the sake of shareholders.

The personal assets of Murakami are said to amount to over 20 billion yen.