Wang You-theng (王又曾), founder of the now-defunct Rebar Asia Pacific Group (力霸企業集團), last month died in a car crash in the US, where he fled to several years ago after it was alleged that he embezzled NT$32 billion (US$993.02 million).
The death of this legendary man has opened up a Pandora’s box and exposed the surprisingly “lenient” ways in which Taiwan’s judicial system treats financial criminals. On the other hand, the case concerning the embezzlement of NT$12.7 billion by former Singfor Life Insurance Co (幸福人壽) chairmen Huang Cheng-i (黃正一) and Eric Teng (鄧文聰) from their company has now entered its final stage; and Dingli Group (鼎立集團) founder Chin Hsiang-yu (秦庠鈺) has allegedly jumped bail and fled to China as the verdict against him in an investment scam that earned him NT$13.6 billion is under appeal.
However, these cases are only the tip of the iceberg. In today’s Taiwan, where young people are struggling to get by on monthly wages of NT$22,000, financial crime is so common that it does not make headlines unless it involves at least NT$10 billion. Moreso, defendants who have stolen money that is never retrieved and have absconded is not considered newsworthy. The public outcry during the Sunflower movement over the widening wealth gap, business monopolies and a lack of ethics seems to have subsided now that a different political party has taken office.
The way the judicial system treats financial criminals is astounding. At a time when rapid Internet connections are ubiquitous, Taiwan’s strategy for fighting economic crime is at best described as ordering prosecutors to jump in the water and swim after a yacht; and when they fail, the public blames the system for being impotent.
Establishing a legal framework for fighting economic crime is of course complicated and requires expertise. Nonetheless, a look at the ways in which North American and European countries and the international community have been dealing with this issue shows that the main approach is to catch the criminal and retrieve the money. With regard to retrieving the money, the basic principle is to make sure that crime does not pay. The focus of the legal system should be on seizing and confiscating any illegal proceeds to deprive the guilty of all profit and thus turn financial crime into a losing game.
However, laws on confiscation are based on Qing Dynasty legislation from 1905, when it reformed its laws based on Japan’s criminal code of the Meiji period. According to that framework, illicitly obtained assets can only be confiscated as a form of punishment. This confiscation model, also known as conviction-based confiscation, has many flaws and loopholes, as the case of Wang and others clearly show.
First, there is the problem of third-party confiscation, which is still not an option under Taiwanese law. An analysis of Wang’s and his sons’ Rebar Asia Pacific Group and Eastern Multimedia Group (EMG, 東森集團) cases show that oftentimes illegally obtained money is first transferred to a shell company — usually a subsidiary belonging to a corporate group — where the money is kept temporarily before being moved on. Since the law considers the “natural person” and the “legal person” as independent of each other, shell paper companies, which are technically third parties, cannot be a target of confiscation based on Taiwan’s conviction-based laws. This is a major loophole within the judicial system that on numerous occasions has prevented illicitly obtained money from being confiscated. A product of a bygone era, the conviction-based confiscation model is extremely outdated. It really is a “Taiwan miracle” that the model should remain in use in the 21st century.
Second, there is the problem with issuing an independent confiscation order when a suspect cannot be found, which needs more elaboration in the law. Should the law simply let people abscond with money and do nothing? While defendants who have fled the nation are unlikely to show up in court and await their verdicts, should they be allowed to enjoy the proceeds of crime? The answer is a resounding no. The US and European countries have abandoned the conviction-based confiscation model and adopted various forms of a non-conviction based confiscation (NCBC) model since the middle of last century. This means that in those places, a conviction is no longer a prerequisite for confiscation of assets derived from crime; and if a defendant jumps bail, the tainted assets can still be confiscated.
For example, Section 76a of the German Criminal Code allows for the issuance of an independent confiscation order; in the UK and the US, civil forfeiture has been a successful and longstanding legal practice; and there is the NCBC model that the EU has strongly recommended. In Taiwan unless it involves contraband or other special circumstances, once a defendant absconds, there is no way to confiscate illegally obtained property, even if it remains in Taiwan — not to mention cases in which defendants have died abroad after fleeing the nation.
In addition to Wang You-theng, Andrew Wang (汪傳浦), an arms broker who allegedly accepted NT$30 billion in kickbacks for brokering a deal in the early 1990s, and many others have died abroad after fleeing the nation. While the public is concerned about whether some judges are qualified for their jobs, the real issue lies with the law, which is extremely outdated.
The conviction-based confiscation model carried over from the Qing Dynasty following the Chinese Nationalist Party’s (KMT) move to Taiwan turned the nation into a haven for financial crime. Fortunately, the Legislative Yuan last year passed a bill which is to allow for third-person confiscation, independent confiscation orders and other new measures. The bill, which is to take effect next month, is expected to free the judicial system from restrictions imposed by the conviction-based confiscation model. However, this does not guarantee the prevention of similar problems in the future. The law will not be enforced by itself, and the new model will only work if legal practitioners, long accustomed to the old model, can follow up the new idea.
The new law will not be complete without legislation in related areas. As analysis of past financial crime in Taiwan shows, once the loopholes on confiscation have been closed, the legislature still needs to amend the law on detention — to prevent defendants from absconding — and the law on money laundering — to prevent defendants from hiding their proceeds from crime. Hopefully, legislators will push to achieve these goals.
Lin Yu-hsiung is a professor in the College of Law at National Taiwan University.
Translated by Tu Yu-an
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