The Ministry of Transportation and Communications wants to know why the former head of the China Aviation Development Foundation invested NT$200 million of the foundation's money into two mutual funds controlled by the KMT.
Officials say KMT heavyweight Hsu Li-teh (徐立德) last year improperly invested in funds operated by Grand Cathay Securities (大華證券) and Fuh Hwa Securities Finance Corp (復華證券).
He did so without the knowledge of other board members, foundation officials said.
The investment only came to light in August, after the foundation's new management board presented a review of its financial records to the ministry.
In March, the funds were redeemed without explanation. The timing of the sale has led some to believe that the money was used to support the KMT's presidential campaign, not provide China Airlines with cash.
The foundation said the investment did not follow proper procedure and the timing, in a month when parties were spending millions on campaigns to get their candidate elected, was "very questionable."
In addition, the unloading of the funds in March when the market was not performing well resulted in a loss of roughly NT$50 million.
The ministry says that not only was the investment not authorized, the money was placed in a bond fund -- a category of investment off limits to foundations such as the China Aviation Development Foundation.
Hsu, former vice premier under the KMT government and former head of the party's powerful finance committee, said investing in bond funds was in compliance with the law.
"It's a foundation, and foundations are allowed to invest in bond funds," Hsu said. "I was head of the foundation, and if I couldn't make investments, then who could? It was all legal," he said.
The ministry has asked the foundation to prepare a report on the NT$200 million investment. Depending on what is uncovered, it may hand the case over to the Ministry of Justice.
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