Takafumi Horie, former CEO of Internet service provider Livedoor, was found guilty last March of inflating earnings reports and sentenced to 2 1/2 years in prison. Four other former executives were also found guilty.

Horie was not present Friday for the first hearing of his appeal at the Tokyo High Court, court spokesman Takahiro Ito said, refusing to release any further details of the court session.

Horie pleaded not guilty through his lawyers, according to head lawyer Yasuyuki Takai.

"First of all, (Horie) is not guilty," Takai said he told the court.

Horie and other top executives were arrested in January 2006, sparking a sell-off on the Tokyo Stock Exchange dubbed "Livedoor shock" over the downfall of the company and Horie, who had become a celebrity for his gutsy takeover attempts and flashy lifestyle.

The executives were accused of setting up a number of funds to do stock swaps and other stock trading to pad their books. Prosecutors said the complex schemes fabricated $46.2 million in profits.

Takai said Horie had no intention of evading the law in setting up the funds.

Although Horie's prison term was shorter than the four years demanded by prosecutors, it was considered harsh by Japanese standards, as executives charged with such white-collar crimes generally avoid prison terms.

Horie, a college dropout, became a millionaire by selling Livedoor stock at the height of their value. He drew widespread media attention for his aggressive get-rich-quick schemes, which struck a sharp contrast with the staid conformity of Japan's traditional business elite.

Horie was absent Friday "to prevent turmoil" in the court, Takai said. He said Horie plans to remain absent throughout his appeal trial, which is legal.

At its height, Livedoor drew a large number of individual investors, partly because of Horie's fame. Those investors, many of them amateurs at the stock market, suffered big losses when Livedoor shares nose-dived after Horie's arrest. The shares were later delisted.

The Livedoor case has prompted calls for clearer laws about stock trading and heavier penalties for falsifying earnings reports.