A number of major business scams exposed in recent days are attracting widespread public attention. First, there is an allegation of extortion concerning Zanadau Development Corporation's (
As these scams came to light one after the other, the full extent of the damage has snowballed. Not only have they inflicted severe financial injury upon investors and the general public, they have also disturbed regular investment activity. The negative consequences cannot be overlooked. In view of the lukewarm enthusiasm for investment in Taiwan at present, the exposure of these scams can only further discourage investors. The government must investigate, so that those responsible for the crimes will not go unpunished and order can be restored to investment activity.
The scams share some notable common features. First, in each case, government officials and legislators failed to exercise self-discipline and sought personal profit through investment projects. In the Zanadau project, for example, some lawmakers appear to have served as the front men. Neo-Glass had former director-general of the Government Information Office Chao I (趙怡) serving as its president, and used the former government official's name to promote itself. Government officials and legislative representatives ought to have a deeper understanding of the legal risks they are taking. They should also consider the interests of investors. Instead, however, they now find themselves implicated in scams. This is deeply disappointing. It has forced Yu to instruct a special task force to investigate whether members of the executive branch acted in dereliction of duty. Severe penalties must be imposed if any wrongdoing is revealed. Yu's move is truly necessary. Since reports of lawmakers engaging in illegal activities for their own personal gain have been all too common of late, the Legislative Yuan must also discipline its members.
In view of what Sinovision and Neo-Glass were able to do, the government agencies and units in charge of finance and economic affairs cannot escape suspicion of dereliction of duty. It is reported that Sinovision, which claimed to be a producer of LCD products, never actually manufactured anything during its three years of trading. The company also failed to deliver its financial report to the Securities and Futures Commission on time. A number of ministers had attended the ground-breaking ceremonies for the construction of Sinovision's plants. But when, later, the company was shut down, its CEO vanished and none of the relevant government bodies seemed to care. The general public could be forgiven for believing either that government officials endorsed these companies or that the relevant government bodies failed to conduct adequate scrutiny of these firms, causing grave financial losses on their part. Either way, the government bodies concerned cannot escape blame.
Sinovision and Neo-Glass repeatedly used the media to spread information that presented them in a good light in order to deceive the general public. Sinovision was nothing but an empty shell, having never produced a single LCD. Neo-Glass also fraudulently claimed that several companies were interested in investing in the company. And the investors believed them. These firms were able to lie their way through, convincing investors who did not know better to invest large sums of money.
The government's lax supervision is plain for all to see. Now it has been revealed that even a company that is part-funded by the MOF has been guilty of wrongdoing. This indicates that the finance and economic ministries do not take their work seriously. The FISC case is probably just the tip of the iceberg. If the government continues to be so remiss, tragedies in which investors lose all of their hard-earned savings will recur ad infinitum.
Cracking down on unlawful activities is the equivalent of safeguarding lawful activities. The same applies when it comes to investment. In the past, faced with unlawful protests against lawful investment projects, the government did not use the powers available to it in the criminal law to assist businesses in eliminating investment barriers. As a result, the business community gradually lost its willingness to invest domestically. It instead opted to leave, causing a series of side-effects including today's industrial decline and rising unemployment rate. If the government continues to refuse to use its powers to guarantee the probity of all investment activity, industry and capital will continue to leave. In particular, many businesses interested in making domestic investments face difficulties in obtaining the necessary capital. In such circumstances, how can the government sit idly by while investors are defrauded.
Many investment frauds have succeeded because on the one hand, many legal loopholes exist, giving opportunities to the unscrupulous, and, on the other hand, the passivity of the ministries of finance and economics have made government supervision mere formalities.
Not long ago it was revealed that several major American firms had filed fraudulent financial reports. The news created a panic among investors and in the financial markets, prompting US President George W. Bush to propose tougher legislation on the supervision of firms. Some of the scams mentioned above should have been dealt with immediately when the financial reports had not been filed on time. The government must establish categorically whether the error was the result of legal loopholes or administrative oversight in order to avoid a repeat of the situation.
In addition, some firms have put their money in China, leaving behind large sums of debt to be dealt with by Taiwan's banks. So not only are the interests of the companies' shareholders unprotected, but holders of Taiwanese bank accounts and Taiwanese taxpayers will have to pay too. The government must correct this state of affairs. The consequences of inaction are unthinkable.
The lesson is this: If the ministries of finance and economics do not actively use the government's powers under the criminal law to ensure that investment activity is managed effectively, and continue to hand to the unscrupulous opportunities to do as they please, the same kinds of frauds will occur again and again. We want especially to issue a reminder: All ministers of economics and finance have a tendency to place excessive emphasis on overseas investments, while paying little attention to domestic investment. They place virtually all of their efforts in competing for further liberalization. They are not interested in improving the investment environment at home. On the one hand they increase the capital in the financial restructuring fund while, on the other hand, they liberalize regulations on loan extensions by overseas banking units to Taiwanese businessmen investing in China. This will in fact prompt further frauds.
The government has now decided to put up NT$1 trillion as an industrial revival fund, and offer favorable measures such as a five-year tax immunity for manufacturers. The hope is to stimulate domestic investment. If the ministers of finance and economics cannot do their jobs properly and continue to allow fraud to suck up capital that could otherwise be put to lawful investment uses, all of the government's efforts to revive industries will be jeopardized.
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