Mon, Nov 17, 2003 - Page 10 News List

Law firm settles over huge fraud

SCANDAL The Taiwanese law firm Lee and Li has reached a deal to pay back money that one of its employees embezzled from a US-based company


A settlement has been reached between SanDisk Corp and a Taiwanese law firm whose employee allegedly embezzled NT$2.82 billion (US$83.3 million) from the US high-tech company before disappearing last month, SanDisk said.

The theft, one of Taiwan's biggest corporate fraud cases, involved the unauthorized sale of 127.8 million shares owned by SanDisk that were under the control of Lee and Li Attorneys-at-Law, one of Taiwan's top law firms. The employee who allegedly cashed in the stocks, Eddie Liu, is still missing.

Lee and Li has given SanDisk a cash payment of NT$678 million (US$20 million), the company said in a statement issued Saturday night from its headquarters in Sunnyvale, California.

The law firm has also agreed to pay SanDisk an additional NT$1.52 billion (US$45 million) over four years in 16 quarterly installments secured by letters of credit, it said. Lee and Li has also given SanDisk a credit of NT$620 million (US$18.3 million) to be applied to future legal services.

"SanDisk will record a non-operating charge of US$18.3 million to its third-quarter results, as the credit amount is unsecured," the statement said.

Lee and Li did not comment on the settlement yesterday but was expected to make a statement today.

Liu, who had worked at the firm for 14 years, was a trusted employee who focused on corporate issues and merger and acquisitions, the firm has said. The Taiwanese law firm's long list of clients has included IBM, Sony, McDonald's, Ford and Siemens.

Taiwanese investigators suspect Liu fled Taiwan on a forged passport and might be in China, a popular place for Taiwanese fugitives.

SanDisk, which makes flash memory cards for cameras and other devices, first announced the loss on Oct. 15, one day after it was informed that the shares it owned in Taiwanese chip-maker United Microelectronics Corp were illegally sold, the statement said.

"Lee and Li originally informed SanDisk that approximately 121 million UMC shares were embezzled by its former employee," it said. "Based on subsequent information provided by Lee and Li, SanDisk has now learned that approximately 127.8 million UMC shares owned by SanDisk and under the control of Lee and Li were sold."

The transactions started on Aug. 6 and ended on Sept. 15, SanDisk said.

"The net proceeds from the unauthorized sales, amounting to approximately US$92 million, were embezzled by a former employee of Lee and Li, who is now a fugitive," the statement said, adding that the shares' book cost was NT$2.82 billion (US$83.3 million).

Lee and Li said that it has launched investigations in several countries but that Liu and the assets were still missing.

"Lee and Li and SanDisk believe that insurance will likely not cover this loss," SanDisk said.

SanDisk said that if any of the assets are recovered, the net amount after recovery expenses will be split between SanDisk and Lee and Li.

Eli Harari, president and CEO of SanDisk, was quoted in the statement as describing the alleged embezzlement "an unfortunate and painful event for both SanDisk and Lee and Li."

"I am very pleased that our two companies have arrived at a settlement," he said.

"Both SanDisk and Lee and Li can now refocus our energies on the excellent business opportunities that are opening up for both our companies in Taiwan and China," he said.

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