Fri, Nov 03, 2017 - Page 1 News List

Banks face NT$20bn loss in Ching Fu loan blunder

DRAWING LOTS:The Ministry of National Defense failed to ensure the shipbuilder had the manufacturing and financial capability to deliver on its tender, a report said

By Chen Wei-han  /  Staff reporter

Vice Premier Shih Jun-ji announces the findings of an Executive Yuan investigative report on the extension of a loan to troubled Ching Fu Shipbuilding Co at the Executive Yuan in Taipei yesterday.

Photo: CNA

State-run banks could lose up to NT$20.1 billion (US$665.97 million) for extending a loan to troubled Ching Fu Shipbuilding Co (慶富造船), the Cabinet said yesterday, adding that First Commercial Bank chairman Tsai Ching-nain (蔡慶年), who supervised the syndicated loan, would be removed.

However, there is no conclusive evidence of any political intervention in the loan decision, the Cabinet said.

Ching Fu, which was awarded a NT$35.8 billion contract to build six minesweepers for the navy as part of a domestic warship program, defaulted on a NT$20.5 billion syndicated loan, forcing nine banks to lose a combined NT$20.1 billion, an Executive Yuan report said yesterday.

The investigation revealed major dereliction of duty by the Ministry of National Defense and First Bank in awarding the contract and loan to the financially unstable company, Vice Premier Shih Jun-ji (施俊吉) said.

There were also suspicious money transfers to Ching Fu, and questionable communications between the Presidential Office and the Cabinet over the case, Shih added.

The ministry failed to ensure that Ching Fu had the financial capability to carry out the project; failed to ensure the company had the manufacturing ability; and failed to launch a negotiation process with China Fu and a potentially more qualified bidder, CSBC Corp (台船), before resorting to lots-drawing to decide the winner of the minesweeper tender, the report said.

The ministry lowered the minimum asset requirement for potential bidders from NT$3.52 billion to NT$176.46 million, Minister without Portfolio Lo Ping-cheng (羅秉成) said.

It also neglected that Ching Fu had little ability to construct a shipyard for the minesweepers and awarded the project anyway, Lo said.

“Throughout the whole procurement process, the ministry gave the impression that it was biased toward Ching Fu and relaxed the rules,” Lo said.

According to the report, First Bank was also negligent in failing to ensure that Ching Fu had the financial and manufacturing ability before approving the loan.

While it required Ching Fu to complete a capital increase as part of its loan terms, the bank failed to demand an execution plan in advance, resulting in the bank’s approving an additional loan of NT$1.05 billion to help Ching Fu increase its capital.

“The bank opened its vault for Ching Fu to take the money away,” Shih said.

Tsai is to be removed due to negligence and the ministry has to report its planned disciplinary measures to the Executive Yuan, Shih said.

Meanwhile, Ching Fu transferred NT$4.93 billion of the loan money into five questionable accounts in Hong Kong, Macau and Singapore, which the company said were used to pay ship manufacturing costs, Shih said.

About NT$1.3 billion was transferred back from the overseas accounts to those of Ching Fu’s managers and subsidiaries in Taiwan, Shih said, adding that prosecutors are to investigate suspected money laundering or other illegal activities.

The Presidential Office on Sept. 1, 2015, under then-president Ma Ying-jeou (馬英九), issued a document to the Executive Yuan which included a letter by Ching Fu petitioning the government to assist the company in securing loans, the report said.

Former Executive Yuan secretary-general Chien Tai-lang (簡太郎) then convened two meetings with the banks to discuss the loan case in September and December that year, but Tsai said he was not under pressure to have First Bank lead the loan, Shih said.

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