Tue, Jan 10, 2006 - Page 1 News List

UMC duo indicted for PRC investment

VIOLATIONS Prosecutors charged the firm's chairman and vice chairman with breach of trust for failing to gain approval from its board before investing in a Chinese start-up

By Rich Chang and Lisa Wang  /  STAFF REPORTERS

Then-President-elect Chen Shui-bian shakes hands with United Microelectronics Corp chairman Robert Tsao on March 28, 2000. Tsao was indicted yesterday for breach of trust over allegedly illegal investments in China, a prosecutor said.

PHOTO: AFP

Two top executives at United Microelectronics Corp (UMC), the world's second biggest contract chipmaker, resigned and were indicted yesterday over alleged illegal investments in China.

"[Robert] Tsao (曹興誠) and UMC vice chairman John Hsuan (宣明智) were charged with breach of trust and violating the Business Accounting Law [違反商業會計法 ]," said Tsai Ten-yuan (蔡添源), spokesman for the Hsinchu District Prosecutors' Office at a press conference yesterday.

Violating the two laws could lead to a prison term of six months to five years, Tsai added.

The indictment said that the firm was suspected of making investments in the Chinese semiconductor start-up He Jian Technology (Suzhou) Co (和艦) since 2002, by transferring capital, technology and personnel to the company.

The indictment added that the defendants invested in He Jian to circumvent the government's restriction on local semiconductor companies, which prevents them from setting up production lines in China, and that the firm conducted the investment without gaining the approval of the company's board.

Prosecutors are holding a number of lists of orders that UMC offered to He Jian, and evidence that the company transferred core technologies to He Jian, the indictment added.

Tsai said the defendants were in breach of trust for hiding the investment in He Jian from UMC shareholders. Tsai added that concealing the investments in the company's financial reports had violated the Business Accounting Law.

A UMC official surnamed Cheng was also indicted on suspicion of arranging the investment.

He Jian president Shyu Jann-hwa (徐建華), who is also an executive of UMC, and 24 other UMC officials were not indicted yesterday because evidence was insufficient to indicate involvement in the investment policy, Tsai added.

"Shyu, as an engineer, just acted following the instructions of UMC executives," Tsai said.

To guard against a loss in competitiveness to Chinese firms, the government restricts local semiconductor companies from building more advanced factories in China.

The investigation was launched last February, and sparked a strong response from Tsao, who issued a statement asking the authorities to stop the investigation, calling it "white terror."

The prosecutors' office, however, pledged to step up the probe.

Meanwhile, UMC yesterday said the indictment of the two high-ranking company officials would not affect its operations.

"The two executives have already quit and the board elected Jackson Hu (胡國強) as the [new] chairman," UMC said in a statement filed to the Taiwan Stock Exchange.

The chipmaker's board approved the resignations of its chairman, Tsao and vice chairman, Hsuan, in a temporary meeting yesterday, according to an earlier statement.

UMC said on Dec. 30 that Tsao planned to offer his resignation during the board's regular meeting in March to safeguard shareholder's interests.

But Tsao and Hsuan may still be able to influence the new board, as they have been hired as senior consultants, making them qualified to attend board meetings.

Chief executive Jackson Hu will take Tsao's post as planned, the company said in the statement.

Alfred Ying (應宗傑), head of Grand Cathay Securities Co's research department, said that the charges against the executives will not greatly damage the chipmaker's stock price or its fundamentals, as investors factored in the allegedly illegal Chinese investment and the personnel shakeup.

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