Fri, Aug 11, 2017 - Page 1 News List

Firm questioned over contract to build navy ships

By Jason Pan  /  Staff reporter

A Ching Fu Shipbuilding Co minesweeper is pictured during construction in an undated photograph.

Photo courtesy of Ching Fu Shipbuilding Co

Authorities in Kaohsiung yesterday questioned executives of Ching Fu Shipbuilding Co (慶富造船), which is suspected of defrauding banks and using money intended for a Republic of China Navy contract to invest in projects in China.

The Kaohsiung District Prosecutors’ Office questioned 19 people from the company, which was contracted by the navy to build six minesweepers.

Company executives are suspected of securing NT$35.293 billion (US$1.164 billion) in loans under false pretences.

Ching Fu owner and president Chen Ching-nan (陳慶男) and his son, company vice chairman Chen Wei-chih (陳偉志), were later released after posting bail of NT$8 million and NT$5 million respectively.

More than 100 law enforcement personnel, headed by Kaohsiung prosecutors and the Ministry of Justice’s Investigation Bureau, on Wednesday searched 14 locations linked to the probe into the firm and its parent company, Ching Fu Group (慶富集團).

Company executives and managers involved in procurement and financial operations were questioned by prosecutors and were listed as people of interest in the case.

Ching Fu Shipbuilding, one of Taiwan’s largest private shipbuilders, in October 2014 won a Ministry of National Defense contract to build six minesweepers as part of the nation’s indigenous ship building and upgrade program.

After securing the contract, Ching Fu Shipbuilding allegedly colluded with a South Korean firm in 2015 and last year to set up three overseas shell companies to launder money, prosecutors said.

Chen Ching-nan and Chen Wei-chih used fraudulent receipts and forged documents from the shell companies to obtain loans from 12 Taiwanese banks, prosecutors said.

The largest was a NT$20.5 billion joint loan from a consortium of nine banks headed by First Commercial Bank (第一銀行).

The first of the vessels to be built according to the contract was a 700 tonne ship, which is being constructed by Italy’s Intermarine SpA, with US firm Lockheed Martin providing support for the mine detection hardware and weapon systems.

Ching Fu Shipbuilding was to build the remaining vessels.

Prosecutors said that Chen Ching-nan and Chen Wei-chih had admitted using false documents to obtain bank loans.

However, they said the firm faced financial difficulties because the ministry had not paid initial installments outlined in the contract.

They said that the situation meant the company was unable to gain US approval to import weapons systems, according to prosecutors.

Allegations of fraud and illegal transfers of funds were raised when investigators found that Ching Fu Group had boosted its listed capital to NT$5 billion, partly from bank loans, and was in talks over a series of joint ventures with Chinese companies.

Investigators said Chen Wei-chih was in Shanghai in June to meet with China MCC20 Group’s (二十冶集團) Zhang Jinxian (張進賢) regarding a joint venture to build luxury resorts and an amusement park on Dongshan Island in China’s Fujian Province.

Meanwhile, the Financial Supervisory Commission yesterday said that despite loan irregularities involving false documents, Ching Fu Shipbuilding had not lapsed in servicing its debt and no domestic banks have filed a complaint about the company.

The commission confirmed that First Commercial Bank had arranged the syndicated loan, of which the shipbuilder had received about NT$15 billion, but declined to provide further details amid an ongoing investigation.

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