Chang Hwa chair is suspended

The Financial Supervisory Commission yesterday announced the suspension of Chang Po-shin (張伯欣), chairman of Chang Hwa Commercial Bank (彰化銀行), from his chairmanship and board directorship for six months.

This followed his breaching of corporate governance in decision-making in the bank's controversial disposal of Taiwan Development Corp (TDC, 台灣土地開發) in July last year.

The commission demanded the bank impose a suitable penalty on two other officials, President Chen Chen-jau (陳辰昭) and senior vice president James Chen (陳允進), for their roles in the misconduct.

Chang's suspension will take effect after the official documents arrive at the bank, which could be next week, according to the financial regulator.

"Chang failed to fully elaborate on the process of dealing with the specific buyers and their identity in the meeting with other managing directors on the disposal plan," the commission's spokesman Susan Chang (張秀蓮) said.

This led to a great deal of controversy about the share sale and therefore significantly damaged the bank's reputation, Susan Chang said.

Also, the lender's decision to rebate NT$350,000 in cash to the specific buyers to compensate for their increased purchase costs later on violated market practice, plus its failure to preserve the sound recording of the managing directors meeting, which all showed the absence of internal control and corporate governance, she added.

The prosecutors have launched large-scale investigations of possible insider trading on the sale of TDC shares previously owned by Chang Hwa, in which Chao Chien-ming (趙建銘), President Chen Shui-bian's (陳水扁) son-in-law, was accused of buying 20 million TDC shares under the name of his mother, Chien Shui-mien (簡水綿), after learning the stock was likely to rise.

Chang Hwa said its chairman and president met with Chao prior to selling 12.45 million shares of Taiwan Development on July 25 last year but argued that Chao did not declare his intention to buy those shares in the meeting, while the lender was not aware that one of the potential buyers was Chao's mother at that time.

Chao was detained by prosecutors yesterday for further investigation, while Chang Hwa's Chairman Chang has been questioned several times.

However, the commission shied away from whether Chang clearly knew that Chao would acquire TDC shares. If evidence is found to prove that Chairman Chang was involved in insider trading, the commission will implement a more serious penalty, it said.

In related news, the Ministry of Finance yesterday appointed Hung Pao-chuang (洪寶川), incumbent associate professor at China Institute of Technology (中華技術學院), to replace Su Teh-jien (蘇德建) as TDC chairman, the ministry announced late last night.

Su was sacked after prosecutors ordered his detention early yesterday morning.

The ministry said Hung, 51, is a competent successor in light of his expertise and experience. Hung was former director general of the ministry's National Property Bureau.

TDC President Chung Chih-wen (鍾智文) who was stripped of his government-appointed board directorship will be subject to the company board's decision whether or not to remove him from presidency, the ministry said.