Ta Tong loan raises the suspicions of lawmaker

DPP legislator Chu Hsing-yu (朱星羽) yesterday accused Kaohsiung-based Ta Tong conglomerate (大統集團) of illegally diverting funds from local banks to investments in China.

At a meeting of the legislature's finance committee yesterday, Chu said United World Chinese Commercial Bank (世華銀行), Taiwan's eighth-largest publicly traded lender by assets, granted a massive NT$840 million loan.

The group used 10 separate parcels of land -- 700 pings of property altogether -- in Kaohsiung City as collateral.

"If the loan turns bad, the bank can at most liquidate the mortgaged land at NT$600,000 per ping," Chu said, adding that some of the parcels are worth just NT$180,000, according to government tax agencies.

The NT$840 million loan puts the value of the parcels at NT$1.2 million per ping.

"This could be a perfect example of entrepreneurs [taking] money out of Taiwanese banks [and diverting funds] to China," Chu said, adding that he would ask prosecutors to investigate.

While Ta Tong yesterday failed to respond to Chu's allegations, the lender claimed the loan's risk is not as great as Chu suspects.

According to the bank's senior vice president, Yang Chun-wei (楊俊偉), the loan's collateralized land has an estimated market price of NT$1.3 billion.

"The loans are only 70 percent of the land's market value," Yang said, adding the group has a strong reputation in the department store business in Kaohsiung.

Due to government policies, banks are not allowed to finance China-bound investment.

If the group was found using the bank loan to directly fund investment in China, "the bank is entitled to terminate the loan and ask the group to pay up in full," Yang said.

Yang, nevertheless, added that it won't be easy to trace the group's capital sources and outflows, as any funds the group has raised including the bank's loan has been infused into its central financial system before any re-investment was made.