Takafumi Horie, once the high-flying president of Internet service firm Livedoor Co., pleaded not guilty Monday to charges of conspiring to falsify the firm's earnings figures in 2004.</PARAGRAPH> <PHOTO> <TABLE WIDTH='250' ALIGN='RIGHT' BORDER='0'> <TR> <TD><IMG ALT='News photo' BORDER='0' SRC='../images/photos2006/nn20060905a1a.jpg' WIDTH='250' HEIGHT='361'/></TD> </TR> <TR> <TD><FONT SIZE='1'><B>Takafumi Horie, former president of Livedoor Co., on trial for securities law violations, enters the Tokyo District Court on Monday morning. </B> KYODO PHOTOS</FONT></TD> </TR> <TABLE> </PHOTO> <PARAGRAPH>'I've never done such illegal acts, nor have I ordered anything described in the indictment,' Horie said at his first trial session at the Tokyo District Court.</PARAGRAPH> <PARAGRAPH>'The indictment is written with malicious intent and it is regrettable to have such an indictment,' he said. 'The prosecutors argue as if Livedoor's core business was to carry out acquisitions of companies, but that's not true.'</PARAGRAPH> <PARAGRAPH>The 33-year-old founder of Livedoor denied accusations that he violated the Securities and Exchange Law, including accounting fraud and spreading false information on the takeover of a publisher by Livedoor affiliate Livedoor Marketing, in an effort to boost Livedoor's share price.</PARAGRAPH> <PARAGRAPH>Horie's court appearance was the first time he has been seen in public since April 27, when he was freed on 300 million yen bail after three months in detention.</PARAGRAPH> <PARAGRAPH>Horie and four other former Livedoor board members have been charged with conspiring to falsify financial statements.</PARAGRAPH> <PARAGRAPH>Prosecutors alleged in their opening statement the four executives acted on Horie's orders to fabricate a 5 billion yen consolidated pretax profit for the business year to September 2004, rather than report the firm's actual 300 million yen loss.</PARAGRAPH> <PARAGRAPH>Horie has maintained his innocence since his arrest Jan. 23.</PARAGRAPH> <PARAGRAPH>In a separate trial, Ryoji Miyauchi, Livedoor's former chief financial officer and most trusted ally, has pleaded guilty to window-dressing at Livedoor. Former Livedoor Representative Director Fumito Kumagai has also admitted to some of the charges in his trial, although he denied deliberately breaching securities law.</PARAGRAPH> <PARAGRAPH>Prosecutors argued that Horie received reports from Miyauchi, Kumagai and other executives on efforts to inflate the company's earnings through a complex scheme of share swaps and sales of Livedoor's own stock.</PARAGRAPH> <PARAGRAPH>In February 2004, Horie ordered Miyauchi to raise Livedoor's pretax profit forecast to 5 billion yen from the initially forecast 3 billion yen for the year to September by padding sales figures with the proceeds of illegal transactions in the company's stock, the prosecutors charged.</PARAGRAPH> <PHOTO> <TABLE WIDTH='250' ALIGN='LEFT' BORDER='0'> <TR> <TD><IMG ALT='News photo' BORDER='0' SRC='../images/photos2006/nn20060905a1b.jpg' WIDTH='250' HEIGHT='149'/></TD> </TR> <TR> <TD><FONT SIZE='1'><B>People line up outside the Tokyo District Court on Monday morning hoping for tickets to the opening session of former Livedoor President Takafumi Horie's trial. </B</FONT></TD> </TR> <TABLE> </PHOTO> <PARAGRAPH>Despite opposition from Miyauchi, prosecutors said, Horie ordered him to move ahead with the deals.</PARAGRAPH> <PARAGRAPH>The transactions were made through dummy investment funds set up by Livedoor, which the prosecutors said were used to hide the illegal funneling of 3.7 billion yen in proceeds from sales of its stock, which Livedoor booked as profit.</PARAGRAPH> <PARAGRAPH>Horie's defense team called the prosecutors' charges groundless.</PARAGRAPH> <PARAGRAPH>'The prosecutors are just trying to make up a story that Horie committed a crime,' said lawyer Yasuyuki Takai.</PARAGRAPH> <PARAGRAPH>'Logging 3.7 billion yen in sales of Livedoor stock is nothing illegal,' Takai said, noting that regardless of whether the investment funds were paper funds or not, the proceeds from the deal should be booked as sales, not allocated to capital as the prosecutors claim, Horie's attorney argued.</PARAGRAPH> <PARAGRAPH>Horie was not in a position to approve accounts at Livedoor Marketing, so he did not know the details of the sales at the Livedoor unit, he added.</PARAGRAPH> <PARAGRAPH>The flamboyant Internet mogul, who reportedly lost about 10 kg while in detention, wore a dark suit, white shirt and dark blue tie during the hearing in place of his trademark T-shirt.</PARAGRAPH> <PARAGRAPH>However, his appearance and strong remarks lived up to his image as an entrepreneur who challenges the establishment.</PARAGRAPH> <PARAGRAPH>' –

has called the first trial session a grand occasion (to make his case to the public), and I think he wore a suit to show that," defense lawyer Takai told reporters during the lunch break.

If found guilty, Horie faces up to five years in prison, a fine of up to 5 million yen, or both.

Reflecting the high public interest in the case, more than 2,000 people waited outside the court for one of the 61 gallery seats.

Reporters flocked to the court as well, with TV networks airing extensive coverage of the opening session.

A 68-year-old man who identified himself only as Nakamura, spent 20 million yen -- his entire retirement savings -- on Livedoor shares and was among those glued to their sets.

"Miyauchi and Kumagai pleaded guilty. It sounds contradictory that Horie maintained that he never ordered them to cook the books," Nakamura said. He is one of the thousands of shareholders who filed suit against the Internet company, Horie and other senior executives seeking damages to compensate for the plunge in Livedoor shares following the announcement of the probe.

Before Monday's opening session, 10 pretrial meetings that ended Wednesday were held to discuss the facts and evidence of the case, and to arrange the trial schedule.

New rules on pretrial proceedings were adopted Nov. 1 to speed up Japan's notoriously slow judicial system.

Horie's trial is expected to run 26 sessions through Nov. 28, with Miyauchi testifying as a key witness from Sept. 15 to 29. Kumagai will also testify at the 17th session on Oct. 17.

If the trial proceeds as planned, the court is expected to rule on the case by February.