Saturday, January 20, 2007

Rebar: the Once and Future Scandal

All of this has happened before and all of this will happen again. -- The Pythian Prophecy

A neat summary of recent the Rebar affair was presented by Chengchih University finance professor Norman Yin in the Taipei Times on Jan 14.

Yet another family-run Taiwanese enterprise has collapsed amid scandal. China Rebar Co (中國力霸) and Chia Hsin Food & Synthetic Fiber Co (嘉新食品 化纖) announced their intention to restructure due to insolvency. The Chinese Bank (中華銀行) and Great Chinese Bills Finance Corp (力華票券金融公司) have been taken over by the government and local creditors. And Eastern Multimedia Group (東森媒體集團) has cut ties with parent Rebar Asia Pacific Group (力霸亞太企業集團) to protect itself.

Depositors at The Chinese Bank have scrambled to withdraw their savings, creditors are trying to salvage their loans and investors are breathing down the bank's neck. Government officials hurriedly responded by guaranteeing depositors' ac-counts. But Taiwan has nonetheless entered another financial crisis.

This time the family-run financial group made careful calculations to separate out its profitable businesses, gut its financial companies and stick the government with the problems ensuing.

Meanwhile, the government is following the old formula of accepting everything without question, ultimately leaving it to taxpayers to foot the bill.

Family run business collapse. Fugitives off to China. Massive political repercussions. Government left holding the bag. Employees and investors wiped out. Government officials implicated. Pointless resignations. Been there, done that.

The granddaddy of all Taiwan financial scandals was the collapse of the Tsai family's Cathay Group in 1985. That scandal involved a family-run conglomerate that accounted for 5% of Taiwan's GDP. For years it had pursued a policy of robbing its employees to pay its debts, borrowing money it would never return, and paying interest rates as high as 30% annually, which should have signaled that something nefarious was taking place. The government knew perfectly well what was happening -- indeed, the group had regularly been investigated and fined for financial irregularities, but the sums involved were so large that the government was nervous about interfering in the ongoing train wreck.

As Karl Fields pointed out in his excellent book Enterprise and the State in Taiwan and Korea, the extent of the financial operations of these conglomerates, and the way they indifferently trashed the lives of little people, can be seen in the Tsai family's desperate and ruthless use of their employees. The head of the family, Tsai Chengchou, enlisted 700 employees in a credit cooperative and then asked them to apply for loans on his behalf. In many cases the amount of the loan was raised without the employees' knowledge or consent, and far in excess of government limits. Chops were borrowed without consent and loans taken out in employees' names without their knowledge, and approved by trusted managers based on collateral recycled through several loans. Meanwhile he also used the underground financial market, exploiting the common Taiwanese practice of using post-dated checks as loan instruments. When the conglomerate collapsed, Tsai had passed over $US125 million in such small-fry loans, by some estimates, though he was ultimately convicted on 539 post-dated checks worth $US2.5 million, or about $4,600 apiece. Ultimately US$190 million in bad loans had been accumulated through such illegal routes.

As we'll see, the Rebar scandal displays much of this same indifference to friends, family, and employees, with the government once again acting as the enabler.

Things began innocuously enough. The tale began on January 5th with the prosaic announcement that the Central Deposit Insurance Corporation was taking over the Chinese Bank:

The Financial Supervisory Com-mission abruptly announced late last night that it would take over The Chinese Bank (中華銀行) after two subsidiaries under its parent company, Rebar Asia Pacific Group, claimed insolvency protection.

The decision was made after the takeover of troubled Enterprise Bank of Hualien (花蓮企銀) yesterday afternoon in an unprecedented case of the govenment taking over two lenders in a single day.

The commission was to delegate the Central Deposit Insurance Corp to take over the bank at midnight last night. The comission also immediately suspended all powers held by The Chinese Bank's board, supervisors and shareholders. Its board directors have been banned from leaving the country and their assets have been frozen.

The bank's net worth had reached negative NT$15.3 billion (US$469 million). Its shares will be traded in cash transaction only starting on Monday.

The mess quickly began to spread. Within a day, the Rebar Mess began to spread:

The financial regulator yesterday ordered the takeover of a bills financing company by two banks as the Rebar Asia Pacific Group (力 霸亞太企業集團) saw its financial troubles extend to other members of the conglomerate.

The state-controlled Taiwan Cooperative Bank (合作金庫銀行) and the private Cathay United Bank (國泰世華銀行) will take over the financially strapped Great Chinese Bills Finance Corp (力華票券) effective 9am today, Financial Supervisory Commission Chairman Shih Jun-ji (施俊吉) said last night.

Great Chinese Bills, 70 percent held by the Rebar Group, reported a funding gap of NT$1.7 billion (US$52.2 million) yesterday.

It was the second takeover of a financial company under the Rebar Group. The government's Central Deposit Insurance Corp (中央存保) took over The Chinese Bank (中華銀行) at midnight on Friday.

Typically in Taiwan such business conglomerates, called guanxichiye, are headed up by a senior family member who farms out directorships of the various subsidiary businesses to other family members. If the conglomerate runs into trouble, the productive subsidiaries are raped to pay the debts of the unproductive ones, until the assets have been consumed, and then the company collapses. To secure their positions, in the old days they appointed mainlanders, often retired military men, to act as front men, and positioned relatives in the legislature to secure government contracts and to write laws to protect themselves. The KMT government had supported this because it needed funding from wealthy businessmen, the so-called "golden oxes." The Tsai family was brought down by that very practice. When one Cai family member retired from the Legislature in 1983, he was replaced by a nephew, who promptly banded together with 12 other business representatives in the legislature in an assault on banking restrictions. Fearing the development of monster banking institutions without government supervision, the old KMT legislators fought back, defeating the effort to amend the laws, and then forming an investigative committee to look into the machinations of the Group, which eventually led to its exposure and collapse.

On January 8 the papers announced that Wang You-theng, the chief of the conglomerate, had fled ahead of the company's insolvency report.

The chairman of a troubled conglomerate at the center of an emerging financial scandal is reported to have fled to China with his wife late last month, even as prosecutors yesterday announced they were launching an embezzlement investigation.

On late Saturday, investigators said they were prohibiting Rebar Group chairman Wang You-theng (王又曾) and his family members from leaving the country, as they started to investigate whether or not the family had embezzled assets from the Rebar Group.

Immigration authorities reported that Wang and his wife Chin Shyh-ying (金世英) flew to Hong Kong on Dec. 30.

The couple and three of their sons, Wang Lin-i (王令一), Wang Lin-tai (王令台) and Wang Lin-chiao (王令僑), two of their daughters, Wang Lin-ke (王令可) and Wang Lin-mei (王令楣), and Wang You-theng's younger brother, Frank Wang (王事展), were prohibited from leaving the country on Saturday, the Ministry of Justice's Investigation Bureau said yesterday.

Wang You theng's remaining son, Eastern Multimedia Group chairman Gary Wang (王令麟) was not on the list.

Although China and Taiwan have a very low-key extradition program, it is almost invariably reserved for petty or violent criminals. It is rare, if not unprecedented, for people suspected of white-collar crimes or corruption to be returned to Taiwan.

That same day Premier Su reassured the public that everything will be fully investigated, presaging, of course, the inevitable accusations of DPP and KMT incompetence and corruption....

Su also outlined principles for handling the financial crisis of the Rebar Asia Pacific Group and investigating whether there was premeditation behind insolvency claims made by the group's two units.

"We will deal with the case in accordance with three principles -- banning responsible persons from the group from leaving the country, freezing their assets and punishing their irregularities severely," Su told the press yesterday morning.

A Cabinet official later said that Su had suggested that some aspects of the insolvency claims may have broken the law.

"The reasons why [China Rebar Co (中國力霸) and Chia Hsin Food & Synthetic Fiber Co (嘉新食品化纖)] applied for insolvency after [the group's Chairman] Wang You-theng (王又曾) went to China must be investigated," the official said on condition of anonymity.

Sure enough, the KMT and DPP started pointing fingers:

Chinese Nationalist Party (KMT) lawmakers yesterday criticized the government for failing to prevent a run on The Chinese Bank, while Democratic Progressive Party (DPP) lawmakers said KMT Chairman Ma Ying-jeou (馬英九) should do more to help deal with the problem.

Financial problems within the Rebar Asia Pacific Group recently led to two of its member companies applying for insolvency, which in turn triggered a run on The Chinese Bank, also a member of the group. As a result, the bank was taken over by the government on Friday.

Over the next couple of days, legislators also slammed officials for complacency and incompetence.

The fact that the head of the group had fled a week prior to the declaration of insolvency led to suspicions that the whole thing had been in the planning for some time. Suspicions were heightened when on the 8th Rebar admitted to a reporting delay:

China Rebar Co (中國力霸) yesterday admitted a delay in notifying the Taiwan Stock Exchange Corp of its insolvency claim, in response to a NT$50,000 fine imposed by the stock regulator amid speculation that the company had withheld critical information from its investors.

Both China Rebar and Chia Hsin Food & Synthetic Fiber Co (嘉新食品化纖) under the parent Rebar Asia Pacific Group (力霸亞太企業集團) were approved for insolvency protection by the Taipei District Court on Thursday to pave the way for future corporate restructuring.

"There was a two day delay as a result of our own negligence and three New Year holidays over the weekend," the company said in a filing to the stock exchange.

What happened next was inevitable, given the close relations between regulators and companies.On Jan 10, in the best Inspector General style, the prosecutor's office announced that raids were imminent:

Backed by leads which prosecutors categorized as a "major breakthrough," the Taipei District Prosecutors' Office yesterday said it was poised to raid subsidiaries of the Rebar Asia Pacific Group (力 霸亞太企業集團) "at any time."

"Probe actions could be launched anytime after investigators gained possession of documents relating to a potential scandal involving the Rebar Group," Taipei District Prosecutors' Office spokesman Lin Jinn-tsun (林錦村) said.

Taipei prosecutors were yesterday collecting and analyzing documents relating to a possible insider trading and embezzlement scandal in the Rebar Group.

"Prosecutors have received a possible lead from the Financial Supervisory Commission [FSC] on a suspected case of illegal trading involving The Chinese Bank and other firms," Lin said, adding that the FSC documents would serve as "a solid base for the investigation."

Lin said that Lead Prosecutor Chuang Cheng (莊正) would head a team of four Taipei prosecutors and investigators in probing the case. They will also investigate whether the group illegally invested in the Chinese market using shareholders' money, Lin added.

The FSC said it found "frequent and substantial amounts of unusual selling activity" involving shares in The Chinese Bank (中 華銀行), Chia Hsin Food and Synthetic Fiber Co (嘉新食品化纖) and China Rebar Co (中國力霸) last month. The latter two companies filed for insolvency protection on Thursday.

No doubt shredders all over Rebar fired up at that announcement. The next day headlines read Rebar Raided:

A large team of special agents from the Bureau of Investigation raided the headquarters of Rebar Asia-Pacific Group (力霸亞太企業集團) and questioned The Chinese Bank general manager Wang Lin-chiao (王 令僑) yesterday.

Taipei District Prosecutors Office Spokesman Lin Jinn-tsun (林錦村) said that four prosecutors and more than 150 special agents were assigned to qquestion personnel involved in the case.

After receiving warrants, the investigators raided offices and residences in Taipei City and Taipei and Ilan counties. The raids began at 9am, and were ongoing at press time last night.

At the Rebar Group's headquarters on Zhongxiao E Road in Taipei, Prosecutor Lu Hsiao-yun (盧筱筠) led a group of special agents during the raid and questioned Wang Lin-chiao, group owner Wang You-theng's (王又曾) seventh child. After a short interrogation, Wang Lin-chiao left with a small group of agents, but he returned to his headquarters at around 3pm.

He later told reporters that he had guided the special agents in a raid on his residence.

"I was simply cooperating with them [the agents]. At this time, I feel awkward about the relationship and feelings between me and my father," Wang Lin-chiao said.

The comments in the article highlight the family nature of the business group, in which a business collapse affects individuals across the extended family, for whom the business represents their entire lives. Such family businesses are the very essence of Taiwan business life -- two of the universities I have worked for were family run. The family not only provides the ownership structure, it also creates the template by which employees are supposed to relate to each other. A friend of mine who recently considered leaving a family-run business but then decided not to was told, by an employee entirely unrelated to the family who owned the business: "We knew you'd come back to the family." Even in businesses where there is no blood relationship, the owners have some tie that binds -- such as going to the same school, or even the same birthday or same last name.

That same day the Gary Wang, Chairman of ETTV, one of Taiwan's most rampantly pro-Blue media, criticized his father

"To be frank, my father asked me for money, but I wouldn't give it to him. That's why this crisis came to a head. It's humiliating and regrettable. But we are in an era run by companies -- I couldn't just give him money like that," Gary Wang said in an interview with the Chinese-language United Daily News. "The value systems of our two generations are different."

Wang You-theng left the country on Dec. 30, Gary Wang said, adding that the departure was so secret that none of the Wang family members knew.

"On Dec. 31, he [Wang You-theng] called [his sons, Wang] Lin-i (王令一) and [Wang] Lin-chiao (王令僑) from Hong Kong and told them to come meet him there. He told them that he was finished, that he couldn't face society," Gary Wang said.

"My dad won't come back," he said.

Wang You-theng's sons Lin-i and Lin-chiao are vice chairman of Chia Hsin and vice president of The Chinese Bank, respectively.

Prosecutors began to detain family members on January 12:

Chia Hsin Food and Synthetic Fiber Co (嘉新食品化纖) general manager Wang Lin-i (王令一) and Union Insurance Co (友聯產險) president Frank Wang (王事展) were held on suspicion of violating the Securities and Exchange Law (證券交易法).

The detentions came as authorities investigated the parent group of the companies, Rebar Asia Pacific Group. The Rebar Group's chairman, Wang You-theng (王又曾), fled to China on Dec. 30 with his wife, and is suspected of having embezzled millions of dollars from the group.

Lin-i is Wang You-theng's son, while Frank is his younger brother.

They were the first two people to be detained in the Rebar case.

"We found it necessary to detain the two defendants as they are suspected of having earned more than NT$100 million [US$3 million] from illegal transactions. They face more than seven years in prison." said Fred Lin (林錦村), spokesman for the Taipei District Prosecutors' Office.

Meanwhile the inevitable political repercussions inevitably occurred as President Chen appointed DP Chairman Yu and Premier Su to handle the Rebar case. Wang You-theng, the head of the Rebar Group, was former KMT Central Standing Committee member, so the KMT also went into damage control mode.

The political fallout spread out from Taiwan as all sides, but especially the pro-Taiwan side, criticized Beijing for becoming a haven for fugitives from China. The Rebar case began affecting China ties.....

Premier Su Tseng-chang (蘇貞昌) yesterday urged China to deport Rebar Asia Pacific Group (力霸亞太企業集團) chairman Wang You-theng (王又曾).

"Many Taiwanese white-collar criminals escape to China. Some of them even make donations to local organizations in China," Su said.

"What they have done really irritates Taiwanese people. I hereby urge the Chinese government to help send them back to Taiwan," he said.

In a separate setting, Chinese Nationalist Party (KMT) Chairman Ma Ying-jeou (馬英九) yesterday said that the party would be willing to make contact "via certain channels" with Chinese authorities to ask that Wang be sent back to Taiwan.

He also called on the Democratic Progressive Party (DPP) not to shift blame onto the KMT because Wang was a party member, at one point serving in the party's central standing committee.

"The DPP has been the ruling party for seven years, and established the Financial Supervisory Commission. Determining whether or not the bank had problems is the responsibility of the DPP," Ma said while touring Yunlin County.


Earlier in the day, DPP officials had urged Ma to help push China to repatriate Taiwanese criminals to face justice.

A spokesman for the DPP, Super Meng (孟義超), and China affairs department director Lai I-chung (賴怡忠) asked Ma to negotiate with China.

Mung said that many former KMT officials had committed crimes in Taiwan and had fled to China.

In Taiwan, as many commentators have complained, it is common for scandals to trigger resignations under which the resigning official "takes the responsibility" but the practices do not change. Hence, it goes without saying that the head of the financial oversight body, the FSC, resigned:

The Cabinet last night approved the resignation of Financial Supervisory Commission (FSC) Chairman Shih Jun-ji (施俊吉) in the wake of a run on The Chinese Bank (中華銀行), a subsidiary of the Rebar Asia Pacific Group (力霸亞太企業集團), which started last Friday after news broke that two other subsidiaries of the group had filed for bankruptcy protection a day earlier.

More than 40 Rebar Group executives have been questioned by prosecutors in the wake of the scandal, and two members of group founder Wang You-theng's (王又曾) family have been detained. Wang fled to China late last month.

At a press conference last night, Vice Premier Tsai Ing-wen (蔡 英文) said Shih had tendered his resignation yesterday afternoon to shoulder responsibility for the scandal.

Tsai said that Premier Su Tseng-chang (蘇貞昌) had reluctantly approved his resignation.

As to who would take up the vacancy left by Shih's departure, Tsai said Su would discuss the issue with the president, who is scheduled to return to Taipei this morning following his five-day trip to Nicaragua, where he attended the inauguration of Nicaraguan President Daniel Ortega on Wednesday.

"I resigned in order to take responsibility for the recent social disturbance caused by the overnight outbreak of long-standing malpractice in the financial sector," Shih said in a text message last night.

On cue, the local pro-Green newspapers launched editorials complaining about China's sheltering of fugitives from Taiwan. The Taipei Times noted on Jan 13:

But when Taiwanese politicians and businesspeople run off with the cashbox, they head straight for China. And why not? They will be welcomed with open arms in a country where they likely speak the language, knowing they will never have to face the music back home. If Taiwanese authorities make a fuss, then they just have to grease a few CCP wheels to keep the champagne flowing.

If the fugitive gets really lucky, he or she will be adopted by the CCP and used for political purposes, like Chen Yu-hao (陳由豪). The former Tuntex Group chairman, after stealing NT$800 million (US$24.42 million) from his firm, spent the better part of a year trying to undermine Taiwan's democratically elected government with sensational faxes to media organizations alleging all kinds of malfeasance by the president.

No doubt he was compelled by his deep sense of moral duty to his homeland, which is why he refuses to return to it and answer the legal charges against him.

Let's not forget former Kaohsiung City Council speaker Chu An-hsiung (朱安雄). Chu, who was also president of the An Feng Group, was convicted for his role in the theft of NT$22.7 billion from his firm. In an act of blithering incompetence (or brazen corruption), prosecutors allowed him to wander free on NT$5 million bail for two months before he was to report to jail to serve his sentence. Needless to say, he never showed up for his date with the jailer and his last known stop was -- take a guess -- China.

The following day that same paper opined:

What makes matters worse for Taiwan is that many of the criminals who run off to China use their stolen money to finance projects there. Adding salt to the wound, every now and then some of these criminals are wined and dined by Chinese officials. Such scenes engender great resentment, especially on the part of hardworking Taiwanese who have lost life-long savings to these criminals.

The Taipei Times also listed other criminals who have done the same:

"They are the honored guests of Chinese officials because they carried their cashbox to China or have substantial business interests there," said Lin Ching-tsung (林慶宗), a prosecutor with the Kaohsiung branch of the Taiwan High Court Prosecutors' Office.

The official said because of the lack of official judicial cooperation with China, Taiwan is unable to ask Chinese to apprehend white-collar fugitives.

Therefore, China has became a "haven" for white-collar fugitives, Lin Ching-tsung said.

He then cited a list of such fugitives, such as Eddie Liu (劉偉杰), a former employee of the prominent legal firm Lee and Li Attorneys-at-Law. Eddie Liu embezzled NT$3 billion and fled to China in 2003.

The prosecutor also mentioned Liang Po-hsun (梁柏薰), the former president of the Overseas Chinese Bank who fled to China in 2004, after being found guilty of embezzling funds from his bank. Liang Po-hsun was eventually persuaded to return to Taiwan to serve his prison term last year.

However, the prosecutor said, Tseng Cheng-jen (曾正仁), the former president of the Kuangsan Enterprise Group (廣三集團) and former chairman of the board of the Taichung Business Bank (台中企銀), was sentenced to 11 years in jail in 2004 for an embezzlement scandal involving his bank before he escaped to China.

On Jan 20 Taiwan News similarly complained:

A Ministry of Justice Investigation Bureau spokeswoman in Taiwan said, however, that of the 227 Taiwan criminal suspects now overseas, China had the biggest share. Some are prominent business people.

Of the 73 Taiwanese suspects believed to be in China, 60 are suspected of economic crimes and most of the others are wanted for some form of corruption.

Beijing has returned just three suspects to Taiwan.

And pro independence group 908 Alliance hacked on Beijing....

With cross-strait charter flights in the spotlight ahead of the Lunar New Year holiday, the group's leader Peter Wang (王獻極) said China should arrange a special "criminal charter flight."

Wang was speaking at a joint press conference with Democratic Progressive Party (DPP) Legislator Kao Chien-chih (高建智).

"It would be very dangerous for the [DPP] government to agree to cross-strait charter flights. We think it is a matter for the Executive Yuan to review," he added.

Since the Chinese government has claimed that it is willing to work with Taiwan to crack down on crime, it should show its sincerity by repatriating Taiwanese criminals who are hiding in China, Wang said.

Peter Wang's comments were prompted in part by the scandal surrounding Rebar Asia Pacific Group (力霸亞太企業集團) chairman Wang You-theng (王又曾), who fled to China and then the US.

Peter Wang said many other white-collar criminals had used China as an escape route.

Peter Wang listed former Kaohsiung City Council speaker Chu An-hsiung (朱安雄), former Kuangsan Enterprise Group (廣三集團) president Tseng Cheng-jen (曾正仁) and former Tuntex Group chairman Chen Yu-hao (陳由豪) as examples.

"China has become a paradise for Taiwanese fugitives," Peter Wang added. "China uses these Taiwanese fugitives, who take huge amounts of money with them, to create disharmony in Taiwanese media and society."

...while the stories of VIP treatment for the Wangs grew with the telling:

Meanwhile, Cabinet Spokesman Cheng Wen-tsang (鄭文燦) said he was investigating a rumor that aviation police officers had treated Wang You-theng and his wife Wang Chin Shyh-ying (王金世英) like VIPs when they left Taiwan last month.

"We are working on this issue and will address any problems that we identify," Cheng said.

It has been rumored that officers of the Aviation Police Bureau speeded the couple's passage through immigration and customs when they left for China on Dec. 13.

And a finance prof at Chengchih U excoriated the government, highlighting many of the issues of the cozy government-business relations that drive politics in Taiwan.

There are shortcomings in the nation's financial regulation system. In addition to the fact that the FSC has never func-tioned well since its founding, its Financial Investigation Bureau has been hampered by a lack of manpower and professional ability among its employees. Political pressure also makes it afraid to handle legal infractions by major financial groups, which has also hamstrung its operation. It also stood by and concealed financial organizations' serious problems, fearing it would get blamed. It has delayed taking action until the problem finally became irreversible.

The IMF has pointed out that many countries are afraid to expose their scandals to the world and are unwilling to take immediate action on financial problems. More and more resources are embezzled as the delays drag on, increasing the cost of resolving them in the future.

Article 64 of Taiwan's Banking Law (銀行法) stipulates that when a bank has depleted more than one-third of its capital, it must immediately report that to the regulatory bodies. The central regulators should then order these banks to replenish their funds. If they fail to do so within the allotted time, banks should be forced to halt operations.

Articles 65 through 67 say that if such banks do not balance their accounts, they should have their licenses revoked and should be dissolved.

There is no spare capital in the nation's financial markets, but many banks operating in the red are still around, including The Chinese Bank and six other troubled banks overseen by the FSC.

Banks that have lost more than one-third of their capital should be handled according to the law, but many appear to be exempt. Financial regulators have legal powers but don't use them. They see the law as immaterial and do nothing while the state of financial organizations deteriorates. The nation's present financial problems are the result of years of inaction by financial overseers.

The FSC's lack of professional leaders and staff with banking expertise has delayed and complicated the handling of these problems. The commission's chairman has made many slips of the tongue, such as saying that a takeover means incorporating the banks into the state and completely ignoring the fact that they are only taking over management of The Chinese Bank on behalf of the depos-itors. He also said that no taxpayers' money would be used to guarantee the deposits, even though the government's relief funds consist entirely of financial operations taxes, paid by taxpayers.

On January 14 Premier Su met with the President, and new raids found fresh evidence

Investigators have seized more useful data in their second search of troubled Rebar Asia Pacific Group's (力霸亞太企業集團) headquarters in connection with a probe into the group's suspected involvement in insider trading, prosecution officials said yesterday.

A team headed by Prosecutor Chang Shu-hua (張書華) searched 17 locations, including the Rebar Group headquarters and the homes of the group's board members on Friday, focusing on accounting and transaction records related to suspected insider trading of shares of two ailing Rebar affiliates -- China Rebar Co (中國力霸) and Chia Hsin Food and Synthetic Fiber Co (嘉新食品化纖).

Lin Jinn-tsun (林錦村), spokesman for the Taipei Prosecutors' Office, said investigators confiscated 40 boxes of documents, including some "very helpful" data.

"The impounded items include computer discs, private notebooks, accounting books and transaction records that will be very helpful with the investigation into the Rebar Group's suspected illegal commercial dealings," Lin said.

On January 16th the story took two new twists. First, the Wangs were reported to have left China and fled to the US (the US was later reported to be helping find the fugitives, who were in the US on a business visa). More importantly, one of the Rebar Group's subsidiaries, Asia Broadband, was raided. This would trigger more political revelations....

Three of Rebar chairman Wang You-theng's (王又曾) sons -- Asia Pacific Broadband Telecom vice chairman and president Wang Lin-tai (王令台), The Chinese Bank (中華銀行) vice president Wang Lin-chiao (王令僑) and Lawrence Wang (王令興) were summoned for questioning by prosecutors yesterday.

The questioning was still continuing at press time.

Lin Jinn-tsun said that six years ago Asia Pacific Broadband Telecom collected around NT$60 billion (US$1.83 billion) in bonds. Around NT$10.5 billion of this sum was paid to the government for access and licensing, while around NT$20 billion was used to pay for the company's own telecom infrastructure. Prosecutors believe the remainder -- around NT$29.5 billion -- was embezzled.

Officials at Asia Pacific Broadband Telecom are suspected of having lied to shareholders and misappropriated funds, Lin Jinn-tsun said.

Lin Jinn-tsun said that the headquarters of Rebar Asia Pacific Group, Chia Hsin Food and Synthetic Fiber Co (嘉新食品化纖), and The Chinese Bank were also searched once again in an effort to uncover more evidence.

This led to headlines the following day, pointing out that the government had been operating in see-no-evil mode for years:

Legislators yesterday demanded that the Cabinet dismiss seven government officials who were board members for Asia Pacific Broadband Telecom Co (亞太固網), a company related to the scandal-plagued Rebar Asia Pacific Group (力霸亞太企業集團).

Asia Pacific Broadband Telecom was raided yesterday in an effort to determine the fate of more than NT$60 billion (US$1.83 billion) the company raised in bonds.

Lawmakers and political parties invested heavily in the firm, as did a number of state-run companies.

Taiwan Solidarity Union (TSU) Legislator Tseng Tsahn-deng (曾燦燈) told a press conference that over the past six years, the broadband company had not presented financial reports to its board members.

Despite this, he said, seven government officials who represented three government-related investors on the company's board had done nothing.

The caucus said figures from the Ministry of Economic Affairs (MOEA) showed that the Taiwan Railway Administration (TRA) had invested NT$8 billion (US$243 million) in the company in 2000.

The Chiao Tung Bank (交通銀行) -- which became Mega International Commercial Bank (兆豐國際商銀) after merging with International Commercial Bank of China (中國國際商銀) -- invested NT$2.1 billion, while state-controlled China Steel Corp (中鋼) invested NT$1.2 billion in the company the same year.

As the government owns a major portion of the shares of the bank and China Steel, the TSU caucus criticized officials for failing to safeguard the public's money.

Tseng also urged prosecutors to investigate whether government officials had been covering up for the company over the past six years.

"You had not seen financial reports between 2000 and last year, and you did not find out the fact that the company had problems? Have you all been asleep?" TSU Legislator David Huang (黃適卓) asked the officials, who were present at the conference.

None of them responded.

For six years the company has not been held to basic accounting standards, even though the government was a major investor through many of its companies. The political impact on the DPP may not be all that large, as the fugitive Chair of Rebar is a former KMT central standing committee member. Everyone can share the blame for this fiasco...the major papers were also reporting that a large number of legislators had invested in the firm, using methods that were less than kosher....

At its inception in May 2000, Asia Pacific Broadband Wireless was named Eastern Broadband.

The Wang family issued stock slips, instead of formal securities certificates, at a selling price of NT$10 per share to raise fund.

Between 60 and 90 percent of legislators of all political parties had snapped up the stock slips at various costs depending on each lawmaker's financial standing and political clout.

Many lawmakers used their influence to raise loans from financial institutions to purchase the slips for quick profits.

Market prices of the slips once rose to NT$16 or NT$17 per share and some even to more than NT$20 a share.

Most members of the Legislative Yuan, their assistants, and even some reporters covering the parliament were believed to have built up their hoarding of the share slips.

Some more financially savvy legislators managed to sell off their holdings for quick profits.

But many others suffered heavy losses because they continued building up their holdings in anticipation of the advent of the new 3G telecom era.

It is easy to see why the public is so disgusted and why politics is so corrupt. It is also easy to see the political nature of the attacks on First Lady Wu, President Chen, and his son-in-law Chao Chien-ming. In this case more than half the legislature is making a killing arranging sweetheart deals on shady stock issues, which they borrow money from friendly financial institutions to purchase, and make a killing for themselves. That's insider trading -- what the First Son-in-Law just got seven years for. Given the hypocrisy of lawmakers accusing Chao of insider trading but made money on sweetheart stock deals, it is easy to see why the DPP did not take a hit in the recent Kaohsiung and Taipei mayor elections.

The elites might cash in, but at last the pigeons arrived home, to roost not in the coops of the law, but to crap on the heads of the little people, as the city of Taipei announced that it sought Missing Rebar Pension Funds:

The Taipei City Government's Department of Labor Affairs yesterday was still searching for NT$450 million (US$13 million) that is missing from China Rebar Co's (中國力霸) labor pension account.

In addition to discovering that the account at the Central Trust of China had a balance of just NT$650,000, department officials also learned that members of the pension account examination committee were appointed by the company, rather than employee representatives, and that the committee had not checked the account for more than a year.

"With little money left in the account, no one in the company will be able to receive a full retirement pension," commissioner of the department Su Ying-kuei (蘇盈貴) said yesterday at city hall.

Meanwhile Asia Pacific Broadband planned board reshuffle even as banks vowed to take legal action against Rebar firms. In Taiwan, companies may be held by families, but debts belong to the public. And the little people pay for the crimes of the rich, as is universal.

One thing that deserves greater mention in all this is the former ruling party: the high-profile fugitives who have fled to China mostly have close connections to the Chinese Nationalist Party (KMT). For example, former Tuntex Chair Chen Yu-hao, a good friend of anti-Chen corruption campaign leader and recent convert to the Blue side Shih Ming-teh, headed up the Tuntex group, which he slimed with billions in debt before riding off into a Chinese sunset. Later he would be made a tool against Chen Shui-bian, in the 2000 election campaign. Lawrence Eyton, always spot-on, reported in the Asia Times:

It must have seemed a good idea to someone, somewhere. According to the Taiwanese newsmagazine Win-Win Weekly, the good idea originated with middle-ranking officials in Beijing's Taiwan Affairs Office, or so a friend of the chief protagonist claims. The plan was this: Get Taiwan's most notorious fugitive to claim that he had made illegal political donations to the election campaign of the Democratic Progressive Party's (DPP) Chen Shui-bian in 2000, thus involving Chen, now president, in a scandal that would spoil his chances of re-election.

Last week the plan was put into effect - with potentially serious consequences for those it was meant to help. The fugitive in question is Chen Yu-hao, the erstwhile boss of the Tuntex group, a conglomerate with interests ranging across department stores, property development, construction and textiles.

Tuntex used to be one of Taiwan's premier industrial groups. Now it is one of its foremost deadbeats, awash in US$1.8 billion worth of debt, and being slowly broken up and sold off by its creditors - mainly state-owned banks. Now Chen Yu-hao has gone from being Taiwan's 10th-richest person to holding a prominent place on its 10 most wanted fugitives list.
Wang You-theng, the hero of this current crisis, is a former member of the KMT's Central Standing Committee. Fugitive Liang Po-Hsun, who returned to Taiwan in April to serve his sentence, was a close friend of James Soong, once a KMT stalwart, now head of the People First Party (PFP). Chang An-lo, now running a "consulting company" in China, is a prominent gangster with old connections to the island's security services and to Alex Chiang, one of the scions of the ruling Chiang family. Wu Tze-yuan, the former KMT legislator whose followers once carried him in on their shoulders to register for elections in Pingtung because he was too afflicted by diabetes to walk, now resides in China. Many others could be named. The list is long, and it will continue to grow.

What can be learned from this mess? Quite a bit. But if the long list of looted and collapsed family-run firms is any indication, it is unlikely that Taiwan will learn anything from this mess.

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