Former First Commercial Bank (第一銀行) chairman Joseph Tsai (蔡慶年) was released on NT$100,000 bail yesterday morning after 10 hours of questioning by Kaohsiung prosecutors over the investigation into a NT$20.5 billion (US$684.06 million) syndicated loan to Ching Fu Shipbuilding Co (慶富造船).
A manager surnamed Tiao (刁) who headed First Commercial Bank’s syndicated loan department was also released on NT$100,000 bail.
The Kaohsiung District Prosecutors’ Office is heading the judicial investigation into suspected financial irregularities, money laundering and other activities that breached the banking regulations when Ching Fu was awarded a NT$35.8 billion contract to build six minesweepers for the navy.
The six minesweepers were part of the nation’s indigenous warship program, but Ching Fu defaulted on the NT$20.5 billion syndicated loan, which forced nine local banks to lose a combined NT$20.1 billion.
Kaohsiung prosecutors working in coordination with their counterparts in Taipei on Thursday raided several locations, including First Commercial Bank’s headquarters in Taipei, the bank’s main office in Kaohsiung and Tsai’s residence in Taipei.
Aside from Tsai and Tiao, 13 other First Commercial Bank employees, along with a Ching Fu manager surnamed Yang (楊), who was in charge of the company’s finances, were summoned for questioning.
During the questioning Tsai reportedly denied any wrongdoing and told prosecutors that “the syndicate loan could not be decided by me alone.”
“The decision was made at a meeting of the board of directors,” he told prosecutors.
Tsai reportedly said his bank had at first rejected the loan application due to Ching Fu’s high debt ratio, but then in June 2015, Ching Fu increased its capitalization to NT$3 billion, up from NT$530 million.
In October that year, the bank’s board of directors convened and decided to approve the loan, which was also partly based on the profits that would be generated from the long-term service and maintenance contract for the six minesweepers after they had been built.
State-run First Commercial Bank was the lead bank of the syndicated loan, but due to insolvency and other financial problems, Ching Fu defaulted on the loan in October.
A report last month by the Executive Yuan found major derelictions of duty by the Ministry of National Defense and First Commercial Bank in awarding the contract and loan to the financially unstable company.
Ministry officials failed to ensure that Ching Fu had the financial capability to carry out the project; failed to ensure the company had the manufacturing ability to produce the minesweepers; and failed to hold a negotiation process with China Fu and a potentially more qualified bidder, CSBC Corp (台船), before resorting to lot-drawing to decide the winner of the navy’s minesweeper tender, the report said.
Ching Fu’s other creditors are Land Bank of Taiwan (土地銀行), Taiwan Cooperative Bank (合庫銀行), Bank of Taiwan (臺灣銀行), Hua Nan Commercial Bank (華南銀行), Chang Hwa Commercial Bank (彰化銀行), Taiwan Business Bank (台灣企銀), Agricultural Bank of Taiwan (農業金庫) and the Export-Import Bank of the Republic of China (中國輸出入銀行).
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