Tuesday, July 18, 2006

Lafayette, We Are Still Here

"Oh, le bon temps, que ce siecle de fer?" -- Edgar Allen Poe, William Wilson

On a trip to France back in 1990, then-Premier Hau Pei-tsun (郝柏村), ordered the Taiwan Navy to cancel its plans to purchase South Korean frigates, and instead purchase Lafayette-class frigates from France. Today, sixteen years later, former premier Vincent Siew was brought in for questioning in the case.

Siew issued a statement after the questioning stating that in 1990, as the then-minister of economic affairs, he had been invited to visit France. During the trip, Siew said, French officials expressed serious concern over a growing trade deficit between the two countries. Siew then suggested that France could narrow the deficit by agreeing to sell fighter jets and warships to Taiwan.

"Then-premier Hau Pei-tsun (郝柏村) did not ask me to handle any arms procurement deals with France before my trip, but because of my work ethic, I filed cables reporting to Hau the progress of my trip," Siew said.

The government's original plan in 1988 was to purchase South Korean-made frigates, but it decided in 1990 to purchase the French-made Lafayette frigates instead.

The Taiwan government complained about the deal, uncovering the scandal:

The French company Thomson closed a deal in 1991 with Taiwan for the sale of six frigates at a price of around US$2.5 billion.

According to the Swiss judicial authorities, although a clause in the contract expressly forbids the payment of commission, the Taiwanese authorities concluded from the inflated price that the deal constituted a serious case of international corruption.

Taiwan submitted on Nov. 6, 2001 a request for legal assistance from Switzerland in connection with the case on the grounds that it involved fraud, money laundering and corruption, also according to the Swiss judicial authorities.

Last year the Swiss agreed to help:

Premier Frank Hsieh gave the "no death penalty" assurances Aug. 26 and the Swiss court was satisfied, enabling the transfer of the documents.

Taiwan has charged [Andrew] Wang with murder, corruption, money laundering and fraud. He was an agent in Taiwan for Thomson-CSF, the French company that sold the frigates to Taiwan.

Wang fled Taiwan following the death of ROC Navy Captain Yin Ching-feng, who was widely believed to have been murdered when he was about to blow the whistle on colleagues for allegedly taking kickbacks in the deal.

The ships had all been delivered to Taiwan by the mid-1990s, and both Switzerland and Liechtenstein have frozen funds in Wang's and his son's accounts that are allegedly linked to the case.

The investigations began when the Taiwanese authorities concluded from the inflated price that the deal constituted a serious case of international corruption.

The scandal touches a wide range of major local political figures, including Hau, and his mortal enemy, the former President Lee Teng-hui:

Prosecutors may subpoena other former policymakers involved in the Lafayette-class frigate procurement, including former president Lee Teng-hui (李登輝).

Lee has previously said that he was not involved in the decision-making process over the warship procurement, and that he did not have the power to interfere with military affairs.

In 1990 and 1991 Lee and Hau were still struggling for control of the government. Hau, the premier, and a conservative mainlander, argued that Taiwan had a parliamentary system in which the Premier should hold the power, while Lee pushed for a Presidential system that would concentrate power in the Chief Executive. Lee shoved through six constitutional amendments during the 1990s, and every one increased the power of the President. At that time too Hau had just come from being head of the military, the former chief of staff, and had enormous influence over military affairs. Lee had him moved from that post to the Minister of Defense, to decrease his power. It seems unlikely that if Hau was in charge of the purchase, Lee Teng-hui got anything out of the deal. The DPP has publicly claimed this, and a Control Yuan investigation also backed Lee and demanded that Hau be impeached -- though several impeached officers claimed Lee knew (Lee was also implicated in a similar kickback scandal over the Mirage Fighter purchase in the 1990s, though that decision also occurred before he gained influence over the military). Perhaps the current legislative freezing of the Control Yuan is an attempt by the Blues to stop the Lafayette investigation, since it touches on so many major mainlander political figures, most importantly Hau and Soong. Other military figures, mostly mainlanders, were impeached over the scandal. The Beeb reported:

A former Taiwanese naval commander and two retired officers have been formally reprimanded over a scandal surrounding the purchase of six French-built frigates in the early 1990s.

Taiwan's government watchdog agency, the Control Yuan, said the abrupt decision to switch to French from South Korean frigates was "hurried and chaotic" according to the 60-page impeachment document.

Three other retired officers, including former premier Hau Pei-tsun, avoided impeachment which correspondents say would have caused a damaging political storm.

Officials on the Control Yuan's investigative committee said Mr Hau had disregarded proper weapons purchasing procedures when he ordered the switch. However a motion to impeach him was overruled on lack of evidence.

Mr Hau says his conscience is clear and is pressing the authorities to clear his name.

Even if the bucks never reached Lee, everyone else got some:

The special prosecutorial panel has scrutinized a large number of Swiss court files believed to be related to the kickback scandal.

They include information about 46 bank accounts in the name of Andrew Wang (汪傳浦) -- a key suspect in the kickback scandal -- his three sons and Wang's company. All of the accounts have been frozen by the Swiss Federal Court.

The files also include details on a number of previously unexposed overseas bank accounts related to the US$2.8 billion Lafayette deal, as well as information about account transactions.

Andrew Wang fled the country following the death of naval Captain Yin Ching-feng (尹清楓), who was murdered in late 1993. Yin was believed to be about to blow the whistle on colleagues who had allegedly taken kickbacks from the deal.

The scandal was blown open from the French end. Some $400 million in kickbacks were involved. The bagman? Well, the French Foreign Minister Roland Dumas fingered one James Soong, currently the chairman of the People First Party (PFP), formerly a presidential hopeful, and future candidate for mayor of Taipei.

According to a CNA report, France's former foreign minister, Roland Dumas, revealed yesterday in an exclusive interview with Le Figaro, a daily newspaper, that a commission of US$500 million was paid by France in 1991 when six Lafayette-class frigates were sold to Taiwan.

The sum was approved by former president Francois Mitterand, and others including the premier and the finance and budget ministers all knew of the deal.

Of the total, US$400 million was paid to the secretary-general of Taiwan's then ruling party, the KMT, while US$100 million went to the Chinese Communist Party's Central Committee in Beijing.

Though Dumas did not name the secretary-general concerned, James Soong (宋楚瑜), now PFP chairman, served as KMT secretary-general from 1989 to 1993.

On Jan. 24, Dumas won a verdict of not guilty in Paris' appeals court, overturning a previous conviction for embezzling from the public treasury that stemmed from the Lafayette case.

On May 31 last year he was sentenced to six months in prison. The publication of yesterday's interview was timed to coincide with the release of Dumas' new book Evidence, Evidence.

The money was thickly spread, as the Taipei Times pointed out in an editorial in 2003:

The latest accusations about James Soong claim he was the recipient of US$400 million in kickbacks from the French company Thomson CSF in return for Taiwan's purchase of six Lafayette frigates in 1991. This paper has never made any secret of its doubts about Soong's honesty; there are still far too many unresolved questions concerning the Chunghsing Bills Finance scandal for that -- the property investments in California, why Soong told so many different stories, why he would put money in a bank account in his son's name ...

But we do not expect that even Soong is capable of pocketing US$400 million himself. If the allegations by former French foreign minster Roland Dumas turn out to be true, then it is a fair assumption that Soong was simply the bagman, the man who picked up the kickback money to then spread it around among the many outstretched sweaty palms of the KMT. The frigate scandal was a scam on such a huge scale that there are probably few in the upper echelons of the KMT at the time who did not have their snouts in the Thomson trough.

In this sense then, the Dumas allegations do not so much impugn Soong's good name -- partly of course because he doesn't have one, but we will let that pass for the moment -- as much as they remind us that the Lafayette scandal has still never been fully dealt with.

That's the same Soong who has been whining about the integrity of President Chen recently. As the Taipei Times complained three years ago:

Well, maybe he doesn't, which is why it is important now to send a team to France to interview Dumas and find out exactly what he knows and how he knows it. But it is clear from his remarks that the payments were funneled through a very senior official and were destined for the highest levels of government. And remember, this is not French money, it is our money. The cost of the bribes were simply appended to the bill for the frigates to be paid by Taiwan taxpayers. What it involves is a breach of trust at the highest level. Yet no officials have even been named let alone charged as a result of the so-called investigation. Why is the DPP government so averse to pushing this case? We can understand why the KMT wouldn't want a real investigation. But who exactly is the DPP trying to protect?

Perhaps it is the US? It was reported back in 2000 as the scandal unfolded that US officials were involved:

Roger Hsieh, a national policy adviser to President Chen Shui-bian, said aides of former U.S. President Jimmy Carter were believed to be involved in the controversial deal.

Hsieh, who has just returned from France, said the French government holds a list of top politicians in Taiwan and mainland China believed to have been involved in the scandal.

He added that he was told by former French Foreign Minister Roland Dumas that Beijing officials had received 20 percent of the total kickbacks and that at least 20 Taiwan officials were involved in the deal.

While Hsieh denied that Dumas had revealed the alleged U.S. officials' involvement, he refrained from disclosing the source of this particular information.

The presidential adviser said he would suggest Chen asks the French government for the name list.

Hsieh, also an adviser to the Ministry of Justice, said he would plead for the presidential pardon of the officials involved, considering the difficulties incurred during the purchasing process.

Or local politicos.....of course, it may simply be fear generated by the fact that the last whistle-blower was found dead.

DPP Secretary-General Lee Yi-yang said the Lafayette frigate kickback scandal is a huge corruption case that has claimed eight lives, seven of whom were foreigners. "Rather than reflecting on itself, the chairman of the KMT, Ma Ying-jeou, has instead made it plain that he hopes the prosecution's investigation into this case can be halted. The KMT's attempts to shift responsibility over the scandal underscore the fact that it was a corrupt party and that nothing has changed up to the present," said Lee Yi-yang.

Captain Yin's tragic death is summarized thusly:

In an interview in Libération Mr. Roger Hsieh, senior advisor to the new Taiwanese President Chen Shui-bian, accused the French defense firm Thomson of being involved ("playing a central role") in the assassination of a Taiwanese naval commander. In September 1993 Colonel Yin Chin-feng traveled to the ship building yards of Lorient to inspect the six 3,800 ton frigates, then under construction, that Taiwan had bought from the French defense firm, in a 16 billion franc deal. According to Mr Hsieh, during that time Colonel Yin Ching-feng told the head of the Taiwanese delegation: "My life is in danger. If one day I should fall victim to a plot, I beg you to avenge me". Colonel Yin Ching-feng then wrote a damning report describing the performance of the frigates. On 9 December, he disappeared; a day later, his body was fished out of the sea off the coast of northeastern Taiwan.

Stay tuned, as there is more to come. Hau's son, a popular mainlander politician with broad appeal to both Blues and Greens, is running for mayor of Taipei. And of course, James Soong has been trying to hog the limelight. Limelight, though, has a way of becoming a bright light shining into dark closets...and revealing ugly skeletons.


Mark said...

Fantastic post, Michael. Excellent of you to make a serious go at bringing together the messy, ugly threads of this sordid story.

This thing will stink for a generation, and the whole story will probably never be known. It caused the resignation of the previous Representative to the UK, after all, a highly respected, centrist, figure, and ruined the career of one of his staffers, who we all ardored in London and did so much to promote Taiwan to the academic community. But what really happened? No-one knows evenr half the story.

Michael Turton said...

Thanks! A sad story...and the more I tried to impose some order on the story, the more it spun out of control. I had forgotten about the murders overseas, for example. Hau was implicated in some other procurement scandals in the 1980s and 1990s as well, though I have forgotten the details. I hope we do know what happened though....since it would mean the end for a ton of political figures I seriously dislike!


taipeimarc said...

Michael, Great post and organization of the facts. I too have wondered for a long time what really went on in this case. The deep blues are up to thier necks in this corruption/murder and it is high time justice is done. Ma protecting the deep blues is interesting, it seems to be an opportunity for him to wash these dreggs out of the political scene (including soong). Hau's son will pay a high price if dad is implicated.

One thing not mentioned and maybe has something to do with this mess is the lose of South Korea's diplomatic recognition of Taiwan around the same time. (i think 91/92??) who can forget the image of the old guy in his pajama's lowering the SK flag at the Taipei embassy for the last time, like no one gave a shit).

Also, unrelated, but interesting. I noticed that all of the new electonic ticketing/gate equipment for the Taiwan High Speed Rail is made by Alstrom. (i think the same company). It seems like this company should be blacklisted for doing biz with Taiwan.

Anonymous said...

BBC had an interesting account about the scandal.


Anonymous said...

Sorry, the full address is:


Anonymous said...

Thanks for the post Michael. I read this and am just shocked and outraged, but what makes me sad is the amount of apathy some Taiwanese feel about this scandal.

I can't help but wonder the corrupting influence this money has had on Taiwanese politics today--Soong uses his ill-gotten gains to fund his extremist unification PFP, and Lee Teng-hui, though his personal benefits from black gold (and perhaps he necessarily participated in some cases in order to consolidate power, much less is known about him) similarly pays the bill for the extremist, independence now TSU.

Then there are the stolen KMT party assets that Ma is liquidating, in order to make it even more untraceable, even more difficult for any future government to ever try to take back. But whatever its history, the problem is it gives an unfair advantage to candidates who until the recent primaries (a little progress!), had absolutely no need to cater to the public since both money and internal party power had nothing to do with the public at large.

So I think about the DPP, and on the one hand, they compensate heavily for the lack of assets through grass-roots support and good-hearted businessmen, there is no way there is no "black gold" over there either. But my guess is that it is very different in nature and is more about direct benefits--businessmen donating and getting bids, getting convenient tax breaks, etc. In any case, my point is that in this kind of environmnet, it would be nearly impossible for the DPP to not have accepted corrupting influences in order to compete monetarily with the KMT/PFP/TSU clowns.

But anyways, this stuff didn't just make people personally rich. If they had all just immigrated to America and taken the money with them, Taiwan would have taken a loss, but politics would be in a lot better shape. But they didn't, a lot stayed, and now they use their money to continue to poison the Taiwanese political process.

Anonymous said...

Interestingly this affair is also a big problem in French politics.
Look here: http://en.wikipedia.org/wiki/Clearstream_scandal#The_Second_Clearstream_Affair

Basically one big contender for presedential elections next years has been accused of secretly receiving money from this deal. The other big contender together with the current president are suspected of being somehow responsible for the "rumor".
You should be able to find a lot of information on this case on the net.
Funny, two parallel worlds with parallel scandals linked by the same deal.

Reality beats fiction any time.
Who wants to start writing the movie script?

Anonymous said...

So what happened to Andrew Wang, the guy that supposedly murdered these people? Is he is prison or what? Does anyone know? This whole thing is a mess.

Anonymous said...

Thank you Michael for the information. It is March 13, 2008, over a week before Taiwan's presidential election. After reading your post and the comments, and looking at the current poll between Hsieh and Ma, I feel disgusted. What you report in English, the Chinese language media would not report it. The people of Taiwan are under the spell of blue media. Well, I should call it the China media. I wish I could have known more and translated the whole story into Chinese language. Well, not the whole story yet...

Anonymous said...

tainesoyes we do know exactly what happened as we were at the heart of the affair.

we cannot bring this evidence foreward as our connections with taiwan and its silent supporters are /would be in great personal danger.

Until we are able to obtain the consent of the \paris Judges we have like everyone else to remain silent.

Your targets of investigation should be London not Paris.