Taiwan’s largest chip packager and tester, Advanced Semiconductor Engineering Inc (ASE), recently initiated a hostile takeover of its main domestic rival, Siliconware Precision Industries Co Ltd (SPIL), which has sparked a war of words between ASE chairman Jason Chang (張虔生) and Hon Hai Precision Industry Co chairman Terry Gou (郭台銘), turning the issue into a talking point in business news outlets.
ASE appears to have emerged unscathed from a pollution scandal in 2013, when investigators discovered that ASE’s largest manufacturing plant in Kaohsiung — called K7 — was discharging untreated wastewater into a river used to irrigate hundreds of hectares of paddy fields. The Kaohsiung District Prosecutors’ Office did not bring charges against Chang on the grounds that he was not aware what was happening at the plant. Instead, prosecutors brought charges against five employees at the K7 plant, all of whom received light sentences. The company was fined NT$600,000 (US$18,096): A drop in the ocean compared with ASE’s annual revenue of more than NT$200 billion. ASE, and all those responsible, were let off the hook, while environmental groups and the public strongly criticized the apparent lack of justice.
The incident is an example of the failure of the legal system to resolve cases in which responsibility is shared by a juridicial person — the company as a legal entity — and a natural person — the owner of the company or company employees, for example.
The Formosa Fun Coast dust explosion incident is another example of a problem of interwoven lines of responsibility between juridical and natural people. Where does the crux of the problem lie and how can it be solved?
The judicial process in the US following the Volkswagen Group (VW) scandal provides a stark contrast. The German automaker is accused of installing software in its diesel cars — an estimated 11 million vehicles — to evade US emissions regulations. If the accusation is found to be true by the US Department of Justice, VW might have to pay penalties of up to US$18 billion in the US alone. The final overall payout could set a world record.
VW chief executive Martin Winterkorn has already accepted responsibility and stepped down, although German media have pointed out that a recent change in the direction of legal policy in the US could mean that aside from pursuing the company’s liabilities, US prosecutors would also be keen to bring charges against company managers for their “personal criminal responsibility.”
It seems it will be difficult for Winterkorn to escape unscathed.
The US department has come down heavily on recent cases of corporate malpractice. The signs of a change in direction have been there for some time. For example, in addition to the extraterritorial prosecution of FIFA following a bribery scandal involving high-level soccer officials, there is also the case of Peanut Butter Corp of America (PCA). A batch of peanut butter produced by PCA was found to contain salmonella, which led to the deaths of nine people and caused hundreds of consumers to fall ill. Aside from the liability of the company itself, PCA owner and CEO Stewart Parnell was sentenced to 28 years in prison. The US judiciary’s unrelenting stance toward food safety should cause Taiwan’s judiciary to blush with shame.
The PCA and FIFA cases are indicative of a new trend. Traditionally, the US justice system has mainly chosen to pursue the criminal liability of juridical persons, rather than individuals — which sets it apart from Taiwan and Germany, where there are only a few insignificant laws covering the criminal liability of juridical people.
However, as seen during the Enron case and the financial crisis of 2008, wealthy business owners, with their inflated salaries, always manage to stay out of trouble during crises, but their companies have to shoulder enormous fines, which leave them bankrupt, while investors lose their life savings.
Since the people who are in charge of the companies are shielded from punishment, there has been no way to keep their reckless behavior and financial crimes in check. The new direction of the US legal system is to make the people in charge feel the pain too. Therefore, in addition to conducting probes into corporate liability, US officials would also prosecute the people in charge of companies for “personal criminal liabilities,” while confiscating any “illegal profits.” European law and draft legislation in Germany is moving in the same direction.
The US department has already joined forces with New York and other district prosecutors to carry out a criminal investigation of VW and Winterkorn.
What is most enlightening from the point of view of Taiwan is that Winterkorn and other high-level managers are not only facing criminal charges: The huge bonuses they received during their tenures at VW — which formed the primary source of their incomes — could be deemed fraudulent income gained through unfair competition and be confiscated. This would reach the root cause of the problem and send a sharp warning to other companies.
The alternative — simply allowing VW to pay a large fine — would only harm investors and those who were not responsible for the grave errors of judgement.
There has been an endless stream of corporate liability cases in Taiwan, from food security and environmental safety to securities and finance.
However, regarding the punishment of juridical and natural people, the direction of even the most fundamental legal policy is in a state of confusion: Does a legal person possess criminal liability? How large should the fine be? How is it related to the criminal liability of the person in charge? How should illegal profits be confiscated? Instead, legislators blindly increase penalties, without stopping to ask whether there are practical ways to enforce the fine.
Taiwan has turned into a safe haven for economic crimes: There is a reason for that.
Lin Yu-hsiung is a professor in the College of Law at National Taiwan University.
Translated by Edward Jones
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