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Mega Financial probed for alleged illegal trading

A brokerage unit run by Mega Financial Holding Co (兆豐金控) is currently under investigation for alleged illegal trading related to an insider trading probe which involves Mosel Vitelic Inc (茂矽), a prosecutor said yesterday.

"Investigators found that Barits International Securities Corp (倍利證券) illegally helped Mosel Vitelic buy and sell derivatives instruments on overseas markets through a paper company set up abroad," said Lin Pang-liang (林邦樑), a spokesman of Taipei District Prosecutors' Office.

Barits International plays a key research, brokerage and underwriting role within the Mega Financial conglomerate, Taiwan's third-largest financial holding company by market value. The company accounted for 2.5 percent of Mega Financial's market share in the brokerage business at the end of 2003, and the company is considered a top-10 player in the securities underwriting business, sustained by its franchises and resources, according to Taiwan Ratings Corp (中華信評).

News of the fraud probe weighed on Mega Financial's shares yesterday, which fell 1.24 percent to NT$19.95 per share on the Taiwan Stock Exchange.

Lin said prosecutors found that Barits International's overseas unit was linked to another crime, in which Mosel Vitelic former chairman Hu Hung-chiu (胡洪九) was charged with selling Mosel Vitelic shares in 2003 through nominal accounts before the stock was suspended from trading on financial owes.

Hu was suspected of spending the proceeds, worth billion of dollars, from trading derivative instruments on overseas markets to avoid investigation, according to Lin.

Lin confirmed that three high-ranking Barits officials were released on bail after they were charged by investigators on Wednesday. Prosecutors will not rule out the possibility of calling on more Barits executives, including former president Jerry Huang (黃顯華) for further questioning, Lin said.

Huang now is a member of the nation's stock regulator the Financial Supervisory Commission.

In response to the probe, Barits International said in a statement that in trading with Mosel Vitelic, nothing illegal was done. The money was transmitted to Mosel Vitelic's accounts after deals closed, rather than going into an individual account, Barits International said in the statement.

Mosel Vitelic spokeswoman Peng Chuo-lan (彭卓蘭) also dismissed the illegal trading allegations.

"The deals are normal financial activities," Peng said.

Peng said Mosel Vitelic bought two short-term bonds worth of US$11.8 million and US$19.55 million, respectively, from Barits International last year. The company redeemed the bonds for cash later last year.
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