Dbtel defends share sale as executives face probe

Dbtel Inc (大霸電子), one of the nation's leading handset vendors, yesterday dismissed a claim of insider trading by its two top executives, saying the share-sale in question had been used to finance the construction of the company's new headquarters.

The statement came after prosecutors and investigators yesterday opened an investigation into claims of insider trading against Dbtel chairman Michael Mou (莫皓然) and his wife, company president Kuo Pei-chih (郭佩芝).

Mou and Kuo were released on bail of NT$3 million (US$90,400) and NT$1 million respectively after being questioned overnight, said Lin Pang-liang (林邦樑), a spokesman of the Taipei Prosecutors' Office, which is handling the investigation.

"We are trying to determine whether they violated rules on securities exchanges or committed accounting fraud," Lin said.

Investigators yesterday searched 12 sites for evidence, including Mou's house, factories and offices of six investment companies linked with Dbtel, Lin said.

Investigators suspect Mou of illegally trading Dbtel shares through the investment companies, which are all chaired by Mou, using inside information, he said.

"We haven't done anything wrong," Mou told a press conference yesterday.

"The allegation of insider trading and appropriation of the company's capital are not true. The company's cash flow is transparent," Mou said.

The six investment companies are Dbtel's major shareholders, and they sold their holdings in order to obtain cash to fund the construction of Dbtel's new headquarters in the Dingpu High-tech Industrial Park (頂埔高科技園區) in Taipei County, he said.

After a NT$3.8 billion share-sale fell through last year, the company halved the size of its 20,000-ping headquarters, Mou said.

However, Mou declined to answer questions about Dbtel's financial connection to the investment companies, but blamed Dbtel's poor financial results for the investigation.

Dbtel posted consolidated losses of NT$2.6 billion, or NT$3.01 a share, in the first half of the year, dragged down by its Shanghai handset unit, according to the company's statistics submitted to the GRETAI Securities Market.

Dbtel shares yesterday fell to a historical low of NT$4.11 on the over-the-counter GRETAI Securities Market.

After severing its manufacturing agreement with US handset giant Motorola

Inc in 1999, Dbtel shifted its focus to manufacturing own-brand handsets. In

2002, Dbtel was granted the license to sell brand-name mobile phones in the

fast-growing Chinese market, making it the first Taiwanese handset vendor to

enter the mobile-phone market across the Strait.

Dbtel is lost this advantage after its local competitors BenQ Corp (明基)

and Inventec Appliances Corp (英華達) received Beijing's approval in May to

sell branded mobile phones in China, which consumes 80 million handsets a

year.