Prosecutors grill top finance official

Taipei prosecutors questioned Minister of Finance Joseph Lyu (呂桔誠) yesterday as part of a probe into a snowballing insider trading scandal involving the president's son-in-law.

The director-general of the National Treasury Agency under the Ministry of Finance, Liu Teng-cheng (劉燈城), was also summoned for questioning. Both Lyu and Liu were released without charge yesterday.

"Prosecutors wanted to learn about the process by which a syndicated loan was granted to Taiwan Development Corp (TDC), as well as the assignment of Su Teh-jien (蘇德建) as TDC chairman," Taipei District Prosecutors' Office spokesman Lin Pang-liang (林邦樑) said yesterday.

Last August Lyu, who was then the chairman of the state-owned Bank of Taiwan, organized a syndicated loan totaling NT$16.5 billion (US$515.1 million) for TDC from 29 banks.

That loan is at the center of the investigation into alleged insider trading involving President Chen Shui-bian's (陳水扁) son-in-law, Chao Chien-ming (趙建銘). Prosecutors suspect that Chao learned insider information about the loan, and then purchased TDC shares through an account held by his mother in order to profit when TDC's share price soared after the loan was publicly announced.

Key meeting

Lyu held a board meeting of Bank of Taiwan last June, during which the decision was made to organize the loan for TDC.

In July, TDC chairman Su, Chang Hwa Commercial Bank chairman Chang Po-shin (張伯欣) and bank president Chen Chen-chao (陳辰昭) dined with Chao, Waterland Securities Co director Tsai Chin-wen (蔡清文) and businessman Yu Shih-yi (游世一) at a Japanese restaurant in Taipei. Prosecutors suspect that at the dinner, Su Teh-jien informed the others about the loan to TDC.

Tidy profits

After the dinner, Chao's mother, Tsai and Yu bought a large amount of TDC shares that had been released by Chang Hwa bank. When the loan was publicly announced, TDC shares skyrocketed from around NT$2 to NT$18 within a year, allowing Chao's mother and the other two to make substantial profits. Chao has denied any wrongdoing.

Prosecutors doubt the legitimacy of the syndicated loan, since TDC had NT$3 billion (US$94 million) in capital. They also suspect that the terms of the loan were flawed and that it should never have been approved.

Su Teh-jien (蘇德建), a former official of the Bank of Taiwan, was made TDC chairmen on June 1 last year by Lyu and the assignment was approved by Liu, the head of a task force that oversees government-appointed representatives at financial institutions. Prosecutors suspected bribery may have been involved in Su's appointment.

Clear conscience

After leaving the prosecutors' office yesterday, Lyu insisted that he had a clear conscience about the alleged connection between his chairmanship at the Bank of Taiwan last year and the insider trading scandal. All TDC matters he was involved in were legal and reasonable, he added.

Premier Su Tseng-chang (蘇貞昌) yesterday said that he told Lyu before he was questioned to "honestly face the investigation by clearly responding to all the allegations in the scandal."

Prosecutors yesterday afternoon also summoned Chao and Tsai from prison to try to learn where huge deposits made into the bank accounts of the Chao family came from.

Investigators suspect that Chao, an osteopath at National Taiwan University Hospital, may have accepted bribes from drug firms after discovering three suspicious deposits of NT$9 million (US$280,000) each in his father's bank account.