Allegations that US$5.8 million had been embezzled at Rechi Precision Co (瑞智精密), one of the world's top three compressor makers, are misleading, the company said yesterday.
The company responded after a probe was launched into claims of unusual transactions between Rechi's top management and its overseas units Rechi Holdings BVI and Rewan Hong Kong Co Ltd (瑞萬).
Shares of Rechi and parent company Sampo Co (聲寶), Taiwan's No. 2 television maker, plunged by the daily limit of 7 percent to NT$29.25 and NT$5.53 respectively on the Taiwan Stock Exchange yesterday.
Sampo holds a stake of 23 percent in the compressor maker, making it the biggest shareholder in the company.
"We did not steal a penny from the company or fake account books. But there are indeed some flaws in our capital arrangement. We only intended to hide an [illegal] investment in China," company president Lee Wen-ching (李文進) told reporters.
"To cope with strong demand, we had to expand our production in China, as 80 percent of our customers, mostly air-conditioner makers, have plants there," Lee said, urging the government to ease the limitations aimed at safeguarding the competitiveness of Taiwan's labor-intensive industry.
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To circumvent restrictions on investment in China, Rechi told the government that it poured US$4.5 million into a private fund through Rechi Holdings, registered in the Viking Islands, Lee said.
In actuality the money went to Rewan, a paper company registered in Hong Kong, which owns a manufacturer of compressor components in China, he said.
Taiwanese companies are only allowed to invest up to 40 percent of their net value in China.
To further conceal the illegal deal, the company counterfeited transactions worth another US$1.32 million in cash dividends for 27 of Rewan's shareholders, the company said.
"What we are doing is in the interests of Rechi's shareholders," Lee said.
Rechi forecast that it would earn NT$760 million in the first six months of this year, compared with the NT$696 million earned for all of last year. Rechi expected compressor shipments to almost double to 10 million units this year from 6 million last year.
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