People never learn. There's a good argument for this grim hypothesis: I call it "the stock market."
I say this following the official unveiling of charges leveled at the CEO of Japan's fallen new-economy darling, Livedoor. On Friday, the Japanese securities officials lodged a criminal complaint. Today, reports indicate that prosecutors will reveal more charges.
The company has lost 90% of its value since an investigation into market manipulation, book-cooking, and a variety of other accusations landed popular CEO-cum-parliamentario Takafumi Horie in the Japanese pokey. A story today in the Asahi Shimbun quotes sources saying that Livedoor is also charged with being the beneficiary of various Hong Kong, Swiss, and British Virgin Islands fronts that were secretly trading in Livedoor stock, pumping money back into the company to shore up its financials.
Livedoor was supposed to be a rollup extraordinaire. It used its ever-inflating stock to paste together -- or attempt to grab -- businesses as divergent as portals, used-car dealers, television, and Japanese baseball. It was attempting to be something akin to Yahoo!
Remember that if the charges are true, this isn't a new kind of scam, even in Japan. The only twist here was that Horie was clever enough to take advantage of a decade's worth of self-doubt and navel-gazing by the Japanese about their economy and their business climate. By presenting himself as a brash, new-era capitalist, Horie seemed to be shaking up the hidebound businesses of the past. (And by taking advantage of legal loopholes, such as reduced disclosure rules for after-hours trading, he was often able to outmaneuver the old guard.)
The point is, this isn't just a Japanese thing. We have seen several high-profile blowups on our own shores, with Enron, WorldCom, HealthSouth, and Tyco
When there's money in the air, no one stops to read the fine print. Heck, shareholders may not even read the bold print, if it doesn't reinforce their sunny beliefs about their stock's future.
It all comes down to this. Greed kills, and it doesn't take real fraud or convictions to cost you your investment. The mere whiff is close enough. Livedoor shareholders' stock is now on the edge of delisting; ask them whether or not they care whether Horie is convicted. Their shares have already been savaged. Their money's gone. They bought into a dream, but they paid for a nightmare. Remember that the next time you hit the "buy" button on a company that sounds too good to be true. It probably is.
For related Foolishness:
- Nate Parmelee takes a peek behind the door.
- Once upon a time, he thought Livedoor had a point.
- What have we learned from Enron? Not much.
Seth Jayson has a low tolerance for companies that entice shareholders with PR instead of profits. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Tyco and CarMax are Motley Fool Inside Value recommendations, while eBay is a Motley Fool Stock Advisor pick. Fool rules are here .
