The China Post staff
The Investigation Bureau (IB) under the Ministry of Justice yesterday denied that the bureau has started monitoring all business conglomerates and individual enterprises that may have encountered financial problems. Press reports said financial scandal at Well Phone Securities Co., the financially troubled Hualon Group, and the tumble of stock prices have prompted the government to take stricter measures. The weighted share price index on the Taiwan Stock Exchange (TSE) fell for four successive sessions this week for a total loss of 176 points to 4707 points, a new low level this year.
Some local media reported that the IB has stepped up surveillance of all so-called “landmine business groups” — conglomerates that may set off new financial crises anytime. The move is also designed to prevent business owners from escaping abroad.
Chairman Chen Chien-chi of Well Phone Securities has been hiding out in mainland China since he escaped to Zhuhai via Hong Kong on July 1. Press reports said that Wong Da-ming, leader of the Hualon Group, has been restricted from leaving Taiwan after some whistle blowers accused Wong of allegedly siphoning huge amounts of corporate funds. Checks worth NT$102 million issued by Hualon Corp., a synthetic fiber giant listed on the TSE, bounced on July 3.
However, Ke Chun-jen, chief prosecutor at the IB’s economic crime prevention center, clarified that the IB will not take initiatives to investigate or place specific business groups or enterprises under surveillance unless governing agencies asked the law enforcement agencies to do so. He said such a principle is to avoid causing negative impact on normal financial and business operations. Ke said the IB is responsible for investigating into major economic crimes in Taiwan, but the bureau cannot conduct the probe if no crime is committed. Whether the business groups or firms with financial troubles have committed illegal activities, he explained, it has to be determined by governing agencies like the Securities and Futures Commission (SFC) and the TSE. The IB will get involved with investigations only after the SFC or the TSE request it to take action. In order to help invigorate industrial and commercial development while avoiding negative effects on financial market order, Ke said, it is impossible for the bureau to recklessly put any specific business organization under surveillance. He also denied that the bureau has drafted a list of companies for surveillance. He also denied that Hualon’s Wong has already been barred from leaving the country. He added that hundreds of enterprises have asked for financial relief from the government or financial institutions. But the law enforcement agencies cannot prohibit chief executives of companies from going abroad just because their companies have sought government help. Meanwhile, Wong yesterday called on officials of the TSE and explained that Hualon has already solved the problem of the NT$102 million check issued to the state-run Taiwan Power Co. Since the check bouncing problem is settled, investors can continue conducting normal trading in Hualon shares when the market reopens next Monday. Wong denied that Hualon Corp. made elaborate efforts to divert funds to its subsidiary in Malaysia and leave debts in Taiwan. Concerning the Well Phone Securities case, prosecutors and IB agents have seized private accounting books prepared by chairman Chen and other senior executives. They also questioned three staffers in the company’s finance department to trace the flow of capital. They are confident of nailing down those responsible for embezzling an estimated NT$6.85 billion from the securities firm. Many judicial officials, including prosecutors and judges, have allegedly engaged in money dealing with the company. In addition to loans from banks, Chen has also reportedly borrowed huge sums of money from underground money lenders.
Legislator Lai Shyh-bao of the New Party yesterday held a public hearing on the flaws of the financial monitoring and audit mechanism concerning securities brokerage houses. Lai said the Well Phone has been one of the oldest securities firms in Taiwan with a history of over 30 years. But the company’s abrupt shutdown of operations and the financial scam involving top executives demonstrate that the SFC has neglected is duty of properly supervising the securities firms. Financial operations of most securities brokerage houses have continued deteriorating due to general economic slowdown and sharply reduced daily transactions on the stock market everyday. The latest statistics show that every branch of securities firms in Taiwan suffered an average financial loss of over NT$1 million last month.