Wed, Oct 18, 2006 - Page 1 News List

Chang detained in latest Mega Financial twist

DRAMATIC Perry Chang was arrested at the international airport on Monday and then detained after an early morning court hearing

By Rich Changand Amber Chung  /  STAFF REPORTERS

A former chief financial official of Chinatrust Financial Holding Co (中信金控) was detained yesterday by the Taipei District Court for his involvement in a scandal relating to Chinatrust's flawed investment in Mega Financial (兆豐金控).

"Chinatrust's former chief financial officer, Perry Chang (張明田), was detained for his involvement in a scandal which might lead to charges of breach of trust and illegal trading," Taipei District Prosecutors' Office Spokesman Lin Jinn-tsun (林錦村) told a press conference yesterday.

Chang was arrested at Taiwan Taoyuan International Airport on Monday as he was leaving for Tokyo.

After holding a hearing early yesterday, the court decided at 2:30am to detain Chang.

Meanwhile, Lin declined to comment on whether prosecutors planned to subpoena Jeffrey Koo Jr (辜仲諒).

Koo Jr stepped down on July 21 as chairman and director of the board of Chinatrust Commercial Bank over the controversial Mega Financial deal.

Chinese-language newspapers such as the China Times and the United Daily News yesterday reported that Koo, Chinatrust's chief legal adviser Deng Yan-dun (鄧彥敦) and vice general manager Lin Hsiang-hsi (林祥曦) had been prohibited from leaving the country because of their suspected involvement in the scandal.

Lin Jinn-tsun said prosecutors could not comment on the matter because of a gag order.

In response, Chinatrust Financial said it was shocked by prosecutors' actions and reassured its clients and shareholders that the company's operations would not be affected.

"We did not expect such a situation to arise after the slew of [administrative] penalties [imposed on us] by the financial regulator in July," Charles Lo (羅聯福), chairman of flagship unit Chinatrust Commercial Bank (中國信託商銀), told a press conference yesterday.

"We will fully cooperate with investigators," Lo said.

Chinatrust Financial, the nation's seventh-largest financial group, is run by a professional management team and will operate as usual without being affected by the incident, Lo added.

He also said that Chinatrust Financial's founder and chairman, Jeffery Koo (辜濂松), would return to Taiwan from the US today.

Koo Jr, who is involved in a two-month Eisenhower Fellowship study program in the US, did not plan to return until Nov. 18, Lo said. Lo added that Koo Jr would only return earlier if prosecutors requested him to.

Chang's detention dealt a blow to Chinatrust Financial shares, which fell 2.8 percent to NT$26 on the local bourse yesterday.

Chinatrust Financial has been penalized twice this year by the Financial Supervisory Commission (FSC) for its flawed investment in Mega Financial -- ?a deal which involved misuse of funds.

The financial regulator discovered that Chinatrust, through its Hong Kong branch, had invested in Mega Financial via structured notes, but later transferred those notes to another Hong Kong-based company.

The Hong Kong firm later cashed in the structured notes, profiting more than US$31 million.

The money was returned to Chinatrust after intervention by the FSC.

Prosecutors now suspect that the Hong Kong firm is a front company controlled by the Koo family and are endeavoring to determine whether anyone has profited illegally from the Mega Financial deal.

According to prosecutors, Chang said he was in charge of Chinatrust's trade of structured notes and that Jeffery Koo Jr did not know about the matter.

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