Livedoor director Fumito Kumagai was arrested on suspicion of involvement in falsifying the company's earnings results, prosecutors said.

Horie and three other former Livedoor bosses were also slapped with new warrants for allegedly cooking the books to hide losses in the company's results for the year to September 2004, prosecutors said in a statement.

The alleged earnings manipulation amounts to about 5.35 billion yen (45.1 million dollars), they added.

The new arrest warrants could lead to further indictments against Horie, the 33-year-old former president of the once high-flying Internet firm who was last week indicted for alleged violations of the securities law.

Horie, who just a month ago was one of Japan's most high-profile business leaders, along with his fellow former executives each risk five years in prison and fines of up to five million yen (42,500 dollars).

Kumagai, the fifth boss to be arrested, is just 28 years old and described by media as a right-hand man of Horie.

Livedoor announced it had appointed Noriyuki Yamazaki as new representative director of the company to replace Kumagai.

Yamazaki joined Livedoor in May 2000. He is chief executive of RedISP, a Livedoor unit that provides a voice over Internet protocol telephone service.

"We take this situation seriously and will make utmost efforts to improve compliance," Livedoor said in a statement.

Meanwhile a business daily reported that Horie has told investigators that he gave instructions that Livedoor should report a profit in the period in question but insists that he was not involved in manipulating earnings.

The brash entrepreneur has said that he told his staff a loss was unacceptable and that a profit must be achieved, the Nihon Keizai Shimbun said, citing an unnamed source.

But it said Horie had insisted his remarks were a call to aim for a profit through legitimate business efforts.

The Tokyo Stock Exchange is believed to be poised to delist Livedoor shares, which have plummeted since the scandal broke.

Even so Livedoor shares jumped eight yen or 12.5 percent to 72 following a report that funds controlled by US investment advisory firm Scion Capital had acquired a stake of 5.52 percent in the scandal-hit Internet firm.

This is the first known instance of a large purchase of Livedoor shares since news emerged of a probe into Horie's empire for alleged securities law breaches which resulted in a sharp slide in the share price.

Livedoor president Kozo Hiramatsu, a 60-year-old new executive replacing Horie, suggested the company may file its own criminal complaint against the former board directors if they committed illegal acts.

"A group of young people tried hard to stand on top of the world but got focused too much on stock prices," Hiramatsu said. "They didn't have enough awareness of a corporation's social responsibility."

Unlike Hiramatsu, dressed in suit and tie, Horie would famously negotiate with men in suits while wearing a t-shirt.

He launched high-publicity, albeit ultimately unsuccessful, bids to acquire a baseball team and Japan's best-watched television network.

He also ran for parliament in September's general election with the blessing, but not on the ticket, of Prime Minister Junichiro Koizumi.

Horie reportedly now spends much of his time reading an encyclopedia in his jail cell, a far cry from the glitzy Roppongi Hills complex where he once worked, lived and partied.

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