Fraud case illustrates lack of legal tools

The alleged fraudulent land deal between the Taiwan Development and Trust Corp (TDTC, 台開) and Far Eastern Silo and Shipping (FESS, 遠倉) is increasingly in the limelight, due to the Aug. 25 questioning by prosecutors of KMT legislator and business tycoon Gary Wang (王令麟).

Investigators suspect that the TDTC, in violation of its obligation to shareholders, knowingly overpaid for the land in a conspiracy with FESS to artificially boost the assessment of the land's price.

Legal experts say this case illustrates the fact that a proper mechanism for fair property estimates for the investigation and prosecution of economic crimes is still lacking.

"If you are to find out whether the price in a deal is unreasonable you've got to know how much would be reasonable," said National Taiwan University law professor Chen Tze-lung (陳志龍).

Therefore a mechanism making an objective property value-assessment of objects which are subject to purchase is crucial, Chen said.

"In many past economic criminal cases the accused were acquitted because the court only had the testimony of witnesses to rely on when assessing an object's value, and witnesses might not be objective."

He suggested that such value assessments should be carried out by the government' s auditing system.

Hsieh Li-kung (謝立功), an associate professor at Central Police University and an expert in the prevention and investigation of money laundering, also stressed the importance of such a mechanism of evaluation.

But he said the task would be better carried out by a joint commission of officials and experts from institutions of the private sector, such as banks.

For many, the TDTC-FESS case is a complicated morass of information. Here is a quick outline:

In Jan 1998 Wang's FESS, a listed company, bought a 75,000m2 plot of land in Yangmei township, Taoyuan County, from Chu chieh-tseng (朱介曾). According to FESS, the purchase price was NT$845 million. FESS then further developed the land.

Meanwhile, the state-run TDTC listed early last year.

In the middle of the same year the private sector shareholders, headed by media baron Chiu fu-sheng' s (邱復生) Era Group (年代集團), won four out of nine seats on the TDTC' s board of directors. The other five board members were appointed by the Ministry of Finance to represent the state.

Last November, TDTC bought this same plot of land from FESS, for roughly NT$1.8 billion, in a plan to build a villa community.

However, the finance ministry thought the deal suspicious because it involved such huge amounts of money.

The issue was discussed by TDTC' s board merely as a provisional motion, and the contract was signed and deposit paid the very next day.

The finance ministry also found that TDTC had last October made a report concluding that such an investment was not worth it -- less than one month before a second report overturned that conclusion and the board adopted the second report and approved the deal.

In May, the finance ministry handed the land purchase case to the justice ministry for investigation.

Meanwhile, in the heated struggle between private sector and governmental shareholders on TDTC's board, TDTC' s vice board chairman Kao Chien-wen (高建文), who represented the Era Group, disclosed that the company' s surplus in its financial statement had been exaggerated.

Following slumps of TDTC stock and runs on the company's banks, the finance ministry in May decided that the Central Deposit Insurance Corporation (中央存保) would take over the TDTC.