Japan fund manager Murakami gets 2-year jail term

TOKYO, July 19 (Reuters) Activist fund manager Yoshiaki Murakami, who shook up corporate Japan with demands for greater returns for shareholders, was sentenced to two years in prison today for insider trading.

The ruling, which Murakami appealed, comes as regulators crack down on corporate wrong-doing a year after an accounting fraud at Internet firm Livedoor that wiped out more than 5 billion dollars in market value when it came to light.

Murakami, who was also fined a record 1.2 billion yen (10 million dollars), had once been hailed as a symbol of the shareholder activism that is taking root in Japan and a champion of market principles.

''Murakami is not alone. Many people commit insider trading, but Murakami's visibility made him an obvious target,'' said Mitsuru Yoshikawa, managing director at Daiwa Institute of Research.

''The courts wanted to send a clear signal to markets.'' The former trade bureaucrat, who terrified executives with confrontational tactics until his arrest just over a year ago, kept his eyes closed and his jaw clenched as the judge read the sentence.

Prosecutors accused Murakami, 47, of inciting Livedoor to launch a failed February 2005 takeover bid for radio operator Nippon Broadcasting System (NBS), buying up 10 billion yen worth of NBS shares before the tussle for the broadcaster drove up the share price, yielding a 3 billion yen profit.

''This was a crime committed by a professional, the money involved is an almost unparalleled amount and the losses cannot be recouped,'' Judge Kuniko Koma told him at Tokyo District Court.

His fund, MAC Asset Management, worth 444 billion yen at the time of his arrest, bought stakes in companies sitting on large piles of cash, pressing them to raise dividends or use their funds in aggressive investments.

The now defunct fund was fined 300 million yen.

The judge said Murakami abused his position both as a fund manager and shareholder activist and encouraged Livedoor in its actions.

''As a fund manager, he 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 judge said.

''Then, using a large amount of money, he continued to buy more shares, taking advantage of a position no ordinary investor could attain''.

He also lambasted Murakami for changing his story and going back on a public apology he had made before his trial, and ''showing no remorse at all''.

LIVEDOOR FACTOR Murakami and Livedoor's flamboyant founder, Takafumi Horie, gained fame as symbols of a buccaneering style of capitalism that some welcomed but others criticised as un-Japanese.

Ater losing the tussle for NBS, Horie was found guilty of a securities fraud at Livedoor and sentenced in March to 2-year in prison.

During the trial, Murakami said he had not believed Livedoor had enough money to fund the TBS takeover.

''I take pride in my actions, which show how capital markets including management-shareholder relations should be,'' Murakami told the court last month.

Known for buying large stakes in firms and pressuring executives to cede more power to shareholders, his fund's targets included railway operators Hankyu Holdings Inc and Hanshin Electric Railway Co, and the Osaka Securities Exchange.

His actions were criticised for causing speculation among investors, who tried to guess where Murakami was investing.

Murakami's arrest caused ripples in Japan's markets and establishment. Investors in his fund included Bank of Japan Governor Toshihiko Fukui before he took over at the central bank.

REUTERS GT DS1220