Saturday, May 20, 2006

Presidential Son in Law Scandal

I was going to comment on this, but ESWN has a good survey. The local Chinese papers are saying that the family of the President's son-in-law has always been this way, and a number of anecdotes about their alleged avarice are now in circulation in the local media and gossip. Anyway, ESWN has the call:

The background first (China Post): This gigantic scandal arose from a stock transaction. Chao-Chien Shui-mien, the mother of Taiwan president Chen Shui-bian's son-in-law, bought some shares in Taiwan Development from the Changhwa Bank for NT$10 million and has now made profits estimated to be at least NT$100 million. So what? Maybe she is an astute investor just like the first lady.

Inevitably, the first son-in-law Chao Chien-ming was asked about this amazing turn of fortune. His initial response to the world was something like: I don't know what my mom does.

Fair enough. Soon, events unfolded gradually over the days as one after another piece of information became known. For example, it was established that Chao went to a banquet on a Friday with Su Teh-chien ( board chairman of the Taiwan Development Corporation), Chang Po-hsin ( board chairman of the Chang Hwa Bank) and the middleman Tsai Ching-wen ( a member of the board of directors of the Waterland Financial Holding Company). Then on the Monday after, his mother bought NT$10 million in Taiwan Development stocks at a special rate from Changhwa Bank. This kind of deal was not open to the public, which does not know that Taiwan Development had just secured a huge bank loan that would allow it to emerge from a financial crisis that drove its stock down to a penny stock. The first son-in-law had to admit being in attendance, but claimed that he had no idea who was going to be there nor was anything discussed about stock transactions. The other banquet attendants have conflicting recollections as to who organized the banquet as well as the purpose. Later, it would turn out that there were three such banquets (that is, this is what is known so far). In addition, it was unclear just who was footing the bill for the stock transaction, and so on. New revelations are still appearing from day to day.

Anyway, the first son-in-law was called to the carpet by the first lady, who said: "崁頭鰻,不知生死門." (in translation: "A blindfolded eel has no idea whether it is going to live or die." According to UDN, eels are blindfolded before being butchered so that they don't know when they are going to die. In Minnan dialect, this is a saying about someone who is clueless about what is going on and quite unaware of the severity of the situation. She implied that he was clueless about what he was getting into.

Chen's ratings have been holding pretty steady under 20%, and I doubt this will damage them much. In fact, he might get a public sympathy bounce, since it seems that the Presidential son-in-law abused his connections without Chen's knowledge.

10 comments:

Anonymous said...

Scott,

You write great stuff, but the insider stock scandal could be (not saying will be) the closest thing to take Chen down as Taiwan's First Emperor. Taiwan is one of the most democratic nations in this world, but Chen's reign has made the rule of law a farce. Yes, you say it was the same under the KMT and I agree, but 2 wrongs don't make a right. I've lived here for 13 years, so I can justly say I've seen all sides of the story on everything, and when FTV is now criticizing Chen, even you should know the gig is up.

Here's how I explain the difference between the KMT and the DPP to my local friends and they all agree (mainlanders and ben-di ren alike): The KMT took money from the coffers when they ruled, but would give some back to the economy in order to build it up and help it when it was down on its knees (recessions). The DPP is like a little kid in a candy shop that just keeps taking anything in sight, never sharing the candy with other people.

Take a look at all other Asian stock markets. Chen took his reign when the Taiex was around 10,000. It is now 30% discount (meand down, as it's around 7100 now) from that after 6 years. South Korea has already hit a new record, as have Hong Kong and Thailand and Singapore ALL higher than they were back in 2000. The Taiwanese are basically "poorer" under his reign. I hope your realize that 70% of investors in Taiwan's stock market are moms and pops - individuals: people who run food stalls. The taxi drivers, etc. They have made NO money in 6 years. Only Chen and his wife and his son-in-law and too many of his administration officials who have been caught in scandals these last 6 years.

I await some rebuke from you in all sincerity, but again, I've lived here 13 years, so I've heard both sides of the story too many times.

-Michael

Michael Turton said...

Why are you writing to Scott?

The KMT took money from the coffers when they ruled, but would give some back to the economy in order to build it up and help it when it was down on its knees (recessions). The DPP is like a little kid in a candy shop that just keeps taking anything in sight, never sharing the candy with other people.

Complete bullshit. For the KMT operated by scooping money off an economy that ran on the hard work and innovation of networks of small Taiwanese firms. It never gave anything back to the island. It's sad that you are repeating that KMT myth.

The Taiwanese are basically "poorer" under his reign. I hope your realize that 70% of investors in Taiwan's stock market are moms and pops - individuals: people who run food stalls. The taxi drivers, etc. They have made NO money in 6 years. Only Chen and his wife and his son-in-law and too many of his administration officials who have been caught in scandals these last 6 years.

Of course the stock market is not as good here in Taiwan! Because the same people who bitch at Chen about the economy put their money into China! What did they expect would happen? If you invest abroad you don't help Taiwan! Doh! Any fool knows that reinvestment in new capital and technology drives growth. S Korea and Singapore invest at home....

but Chen's reign has made the rule of law a farce.

Also asinine. Stuff like this isn't worth the electrons used to display it.

Michael Turton

Anonymous said...

Well, you've got to admit that this particular situation is legally farcical:

The son-in-law of the highest ranking public official (who also happens to be a practicing physician, the most respected profession in Taiwanese society) apparently is too young and not "experienced enough" to be able to tell right from wrong.

Ironic, since President Chen was a lawyer for a good part of his life. I would expect that as head of the household, he upholds certain standards for the conduct of his own family members.

Anonymous said...

Notice the retreat from an earlier position of calling Chen "Taiwan's First Emperor" and stating "Chen's reign has made the rule of law a farce" to this half-hearted posture of saying that the situation was "legally farcical". Even that's wrong. It's a minor scandal and a major embarassment to Chen, but hardly a farce, since Chen's son-in-law will be investigated and prosecuted by Chen's own government if any wrongdoing was occurred.

Notice the difference between the old KMT regime and the DPP governemnt: the lack of transparency and due process during the era of the Chiangs versus the close scrutiny and requirement for accountability in the present government.

Anonymous said...

Thanks for pointing out the logical fallacy, I should've given closer scrutiny to the previous post. However, the irony of such scandals occuring under the watch of a champion for cleaner government (and involving close associates and family members at that) hasn't been lost.

While the old KMT regime was hopelessly corrupt, comparing today's scandals and the failings of a corrupt authoritarian government won't bring us very far. We're supposed to be making progress, and I don't think that either pan-blue or pan-green supporters want to turn back the clock. No form of corruption should be tolerated. The DPP were brought into power because people thought they could realize more equitable governance and end 'black gold', but they're filling their pockets using those same methods.

Michael Turton said...

Ironic, since President Chen was a lawyer for a good part of his life. I would expect that as head of the household, he upholds certain standards for the conduct of his own family members.

I imagine he does. But how can he control them? Do you expect him to chain his son-in-law up? Or what? Since Chen's enemies operate in bad faith, what do you think will happen? Answer: there is nothing Chen could do that would ever satisfy those people, except die in office.

Chen is not responsible for the behavior of his son-in-law. He is responsible for making sure there is an investigation and punishment is meted out.

My attitude is: send the kid to prison. Except that for reason well-connected people in Taiwan don't go to prison. Take Chiu yi for example...

Michael

chyn_in_DE said...

Michael, in hindsight, President Chen should've done something about keeping the behavior of his family members in check, because it's commonsensical to his political life. He doesn't have to keep them chained up, but he should make it clear that no one ought to abuse their privileged positions. His son-in-law isn't exactly uneducated and as a physician, definitely not short on cash. He obviously assumed that his deed would be protected from the public.

Even though investigations are still ongoing, I'm afraid that this whole affair has tarnished the presidency and betrayed the original ideals of the DPP and his supporters.

Michael Turton said...

I agree , chyn. I wish Chen had cracked down. But somehow I think anything he did would not have mattered. This sort of thing just seems inevitable.

Michael

Red A said...

It would be more accurate to explain the KMT / DPP situation like this:

When the KMT were in power, Taiwan was enjoying a golden era of exporting to the USA without many competitors...thus their corruption was "ignored" because everyone was making money.

Under the DPP, the internet bubble burst and China has taken off - I don't think we can blame Chen for this. Thus DPP corruption "feels" like Taiwan is being kicked while its down.

BTW, Korean and Singapore companies do invest in China along with USA Japan and everyone else. Taiwan merely has a massive advantage in language and experience in low-cost labor production. Of course the Chinese are now dominating many fields and Taiwanese struggle to be competitive...must be how American companies felt in the 70's and 80's.

One other question and maybe an answer...why are the roads better in China than Taiwan? Why don't they constantly have to make new potholes, etc.?

The answer is that in China, because they are in blistering growth mode, can be corrupt about building roads and make their money there.

In Taiwan they don't make many new roads, so the corruption ends up being digging up every road every couple months for no reason and leaving it a shambles afterword.

Seriously, it's disgraceful that China has better roads than Taiwan.

Red A said...

Oh, and about the TaiEx being down:

Taiwanese companies on the TaiEx invest in China, thus the TaiEx should be gaining with China fever to some extent. You don't think ACER makes money from its China factories?

So, why is it down? Maybe political risk?