Investigators seize goods from Watson's

Prosecutors seized numerous items of merchandise yesterday alleged to be evidence that the drugstore chain Watson's (屈臣氏) deliberately sold defective goods and products that had passed their expiration dates.

Independent lawmaker Lin Ruey-tou (林瑞圖) accused the Hong Kong-based drugstore chain of obtaining compensation of NT$200 million from an insurance company by alleging that its goods had been damaged by the devastating 921 earthquake.

But, according to Lin, the drugstore itself actually damaged the goods or sold them to wholesalers and retailers.

A week after Lin first made his allegations, Watson's yesterday remained silent about the matter.

After questioning a retailer, surnamed Chan (詹), who claimed to be a victim of Watson's, Taoyuan District prosecutors early yesterday morning searched four storehouses belonging to the retailer in Taoyuan County.

During the search the prosecutors found a large number and a wide variety of defective or expired merchandise, ranging from food and toys to cosmetics and household goods.

"The goods that had passed their expiry dates did so before the 921 quake," Chiang Kui-chang (姜貴昌), spokesman for the Taoyuan District Prosecutors' Office, said.

According to Lin, starting from the 921 earthquake to last March, Watson's sold defective or expired goods to Chan for NT$3 million, almost 90 percent off their retail price of NT$30 million. Chan meant to sell the merchandise to customers.

But after he had paid one third of the price, he realized that it was difficult to sell the goods because of their poor quality, Lin said.

He said Chan refused to make the rest of the payment, but Watson's issued letters to request the unpaid amount. After the news of Lin's allegations broke last week, Watson's issued another letter to Chan, saying that he did not have to pay and that Watson's was willing to take the merchandise back.

The prosecutors seized both letters yesterday as evidence against Watson's.

Prosecutors had the storehouses sealed to preserve the evidence and to prevent the merchandise from being sold. The media reported the merchandise amounts to more than 100,000 items, but prosecutors said the actual number is still unknown.

Lin said the drugstore bought insurance from a British-owned company in Hong Kong, which paid the compensation to Watson's headquarters in Hong Kong. Lin questioned why the insurance matters had been handled in Hong Kong, and suggested it was a way to elude criminal investigation in Taiwan.

Chiang said that the insurance fraud allegation needed further investigation. He added that since certain procedures relating to the compensation claim, such as the assessment of damage, were conducted in Taiwan, prosecutors had the jurisdiction to investigate.

Chiang said the prosecutors would also investigate whether Watson's had cited the "damage" to apply for a tax deduction.

By selling defective and expired goods, Chiang said, Watson's and Chan may have committed fraud and violated laws regulating the sale of cosmetics and food.