Mon, Jun 28, 2004 - Page 11 News List

Yeh rode Procomp hype to firm's fall

By Lisa Wang  /  STAFF REPORTER

Procomp Informatic Ltd Chairwoman Yeh Su-fei speaks at a press conference at the Taiwan Stock Exchange earlier this month. Yeh is currently under investigation in connection with allegations that she misused company funds.

PHOTO: CHIANG YING-YING, TAIPEI TIMES

Yeh Su-fei (葉素菲), founder of Taiwan's first gallium arsenide epitaxial (GaAs) wafer foundry, Procomp Informatics Ltd (博達科技), had been seen as a pioneer in the niche chip sector at a time when most Taiwanese companies only knew of the silicon wafer foundry industry, led by industry giant Taiwan Semiconductor Manufac-turing Co (台積電).

Media hype had termed the GaAs wafer foundry business a future star industry in the late 1990s and early years of this decade, when industry insiders awaited the arrival and rapid expansion of advanced third-generation (3G) mobile service.

But this much-anticipated boom is yet to bloom, and it is not only the industry's reputation that has tarnished. Last week Yeh, 46, was detained by the Shihlin District Prosecutors' Office on suspicion of breach of trust and of violating the Securities Transaction Law (證券交易法) and Accounting Law (會計法).

Investigators indicated that Yeh is suspected of insider trading and embezzling from Procomp, as she could not give clear explanations for anomalies in the company's capital flows. Chiu Chih-hung (邱智宏), a Shihlin prosecutor who is investigating the case, said on Saturday that Yeh was alleged to have stolen NT$6.3 billion from the company.

Chiu said that Yeh wired more than US$10 million to one of her US bank accounts on June 15, and that she provided insufficient explanations for that transaction as well as for the company's missing funds.

"She said, `I don't know' to most of our questions," Chiu said. Investigators said they also found unusual share trades in the weeks before June 10, when the chipmaker sought to sell its global depositary receipts and raise US$117 million to pay its debts.

The scandal broke out in mid-June as Procomp unexpectedly filed a restructuring proposal in a local district court, saying it was unable to maintain solvency.

Procomp's move stunned local investors, as the request for court receivership came on the eve of the maturity date for a NT$2.98 billion corporate bond on June 16.

Procomp blamed the cash crunch on the failure of its overseas share sale, but couldn't explain why the company defaulted on the bond payment while it still NT$6.3 billion in liquid assets on its books, as investigators and the nation's equities regulators pointed out.

"The approximately NT$6 billion fund is derivative instruments on our foreign accounts. The money was frozen because of certain special terms," Yeh said at a June 16 press conference.

These remarks did not answer reporters' questions about the company's cash flow.

"I'm not a financial expert," Yeh said. "I can't give you a clear answer about exactly what the derivative instruments are."

Procomp could be delisted from the local bourse if Yeh and her management team fail to give a clear explanation about the company's financial situations in the next six months.

"Procomp deceived us," said a creditor surnamed Chen who complained to the media, saying that the company swallowed up the life savings of some individual investors.

Chen is one of around 1,600 holders of the NT$2.98 billion in outstanding corporate bonds. Procomp has an additional NT$5.9 billion in bank loans from more than ten local lenders, including Chiao Tung Bank (交通銀行).

Procomp's collapse is in stark contrast to the company's glory days. In 1991, Yeh set up Procomp in Tamshui, Taipei County, with US$160,000 in initial capital. In the beginning Procomp was simply a computer accessory importer, but the company gradually diversified into manufacturing DVD players and motherboards in 1995.

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