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Taiwan also plagued by 'too big to fail' notion

Publication Date : 20-12-2013

 

Kao Cheng-li, the beleaguered chairman of Tatung Changchi Foodstuff Co., on Monday was sentenced to 16 years in prison and hit with stiff fines of NT$1.85 billion (US$62 million) on charges of fraud and violations of the Act Governing Food Sanitation.

Kao is now being held on the suspicion that he may attempt to flee the country, with his assets under close scrutiny to prevent him from manipulating his accounts in order to evade a court-ordered seizure.

It is rather unfortunate for Kao that his modest enterprise in the cooking-oil sector did not meet the requirements to be granted the status of “too big to fail”, and thus was denied the special treatment extended to other chairmen of unscrupulous companies such as Advanced Semiconductor Engineering (ASE), which has yearly revenues of NT$200 billion.

In contrast to the fate of Kao, ASE Chairman Jason Chang has remained relatively unscathed after recent revelations of his company's illegal dumping of untreated toxic wastewater via unregistered and concealed pipes.

Following reports of ASE's illegal dumping, numerous allies of Chang emerged to speak on his behalf, among them Economic Affairs Minister Chang Chia-juch, who stated that the company should not be blasted into the “18th level of hell” for an “oversight,” while at the same holding off a pan-blue lawmaker's appeal to compel ASE to remit past tax incentives of around NT$3 billion on the grounds that there was no legal basis for the order.

Incidentally, rock band Mayday was ordered to pay fines of NT$1.14 million in accordance with ordinances after racking up 47 citations for noise pollution violations when the group's concert overran its scheduled time allotment over the course of an evening. In contrast, ASE's K7 facility received the maximum allowable fines of NT$600,000 for dumping toxic pollutants directly into a river in Kaohsiung.

Prior to the recent dumping case, Chang had also eluded consequences for numerous controversial actions, including allegations of market manipulation leveled after the company on two occasions inflicted tremendous losses on the investing public and government pension and labor insurance funds by employing classic pump-and-dump tactics, first by announcing overly optimistic earnings forecasts, followed by a rumour-mongering campaign spreading misinformation that the company was poised to be acquired by a formidable foreign private equity firm. Chang was also accused of using company funds to build a love nest with his beautiful mistress, in addition to having engaged in insider trading through brokerage accounts registered under the name of the said mistress.

Amid the lack of direct legal repercussions, Chang on Monday issued an apology for his company's actions, promising to donate NT$100 million annually over the next thirty years, the same amount in tax incentives that his company has received.

Chang's supporters include Chang Pen-tsao, outgoing chairman of the General Chamber of Commerce, R.O.C. (ROCCOC), who stated that if authorities were to punish ASE with a heavy hand, Taiwan's paltry GDP growth would be compromised and the nation's internationally renowned semiconductor sector set back for decades to come, while expressing concern about the possibility that the company's employees would face layoffs and unpaid leave.

Meanwhile, Chang Pen-tsao's current post will soon be taken over by newly elected ROCCOC Chairman Lai Chang-yi. Lai, a real estate development mogul, is among a number of developers engaged in an arms race to outdo the competition by driving up home prices. Despite the ROC Central Bank's best efforts, Taiwan's rampantly rising home prices have encountered few attempts by authorities at regulatory control, representing another facet of the nation's “too big to fail” problem. According to reports, the banking sector had expressed concern over policies aimed at suppressing real estate speculation, saying that if prices were to decline, financial institutions would face tremendous default risks. The claim flies in the face of the bank's actual loan practices, in light of revelations that certain state-run banks had provided the Wei family of Ting Hsin International Group  exceedingly favorable loans — 99 per cent of the purchasing price for one of Taipei's most prestigious luxury condos. The Taipei City Government, meanwhile, elected to adorn MRT stations along the Xinyi Line, which runs across one of the wealthiest districts in Taipei, with NT$100 million worth of art installations and murals, further bolstering the speculation which has been driving up real estate prices.

US$1 = NT$29.86

 

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