Japan fund mgr Murakami jailed for insider trading

TOKYO, July 19 (Reuters) Activist fund manager Yoshiaki Murakami, who shook up corporate Japan with demands for greater returns for shareholders but got caught up in the Livedoor scandal, was jailed for two years today for insider trading.

Murakami was also fined a record 1.2 billion yen (10 million dollars) and his now defunct fund was fined 300 million yen.

The bureaucrat turned shareholder activist, who terrified executives with his confrontational tactics until his arrest just over a year ago, sighed as he took his seat and closed his eyes as the judge read the sentence.

Murakami, who denied any wrongdoing, traded shares with prior knowledge of a February 2005 takeover bid by Internet firm Livedoor for radio operator Nippon Broadcasting System (NBS), prosecutors said.

He bought 10 billion yen in NBS shares prior to the failed bid and, as the tussle for the broadcaster drove up the share price, yielded a hefty profit.

Murakami was known for buying stakes in companies and pressuring them to cede more power to shareholders.

He 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.

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.

In convicting him, the Tokyo District Court said Murakami, 47, had abused his positions as a fund manager and activist shareholder and had first encouraged Livedoor in its actions.

''As a fund manager, the defendant became a major shareholder using a massive amount of funds and subsequently acted as an shareholder activist, creating a situation where he received insider information,'' it said.

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

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

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

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.

His now-defunct 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 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.

In June 2006, regulators tightened reporting rules and obligated investors to report newly acquired shareholdings of 5 per cent or more within two weeks.

REUTERS GT VV0957