The Kaohsiung District Prosecutors’ Office has concluded its investigation into the minesweeper procurement case that caused a scandal last year, and has indicted the chairman and senior executives of Ching Fu Shipbuilding Co.
However, the public servants involved in the case have emerged unscathed, as have personnel at First Commercial Bank, which headed the consortium that provided a joint loan to Ching Fu. The outcome shows the difficulty of punishing anyone for malpractice within companies under the legal frame.
Amendments made to the Criminal Code on July 1, 2006, narrowed the definition of “public servant.” Only those who handle procurement operations in accordance with the Government Procurement Act (政府採購法) belong to the category that the latter part of the Criminal Code’s Article 10, Paragraph 2, Subparagraph 1 describes as authorized public servants who are empowered with legal function and power, serve in an organization of the state or a local autonomous body and are engaged in public affairs in accordance with law.
First Commercial Bank is considered a government-run company, so its personnel are definitely not public servants, according to the Criminal Code.
Consequently, even if there was malpractice involved in their loan provision, it would not constitute the offense of profiteering, for which the Anti-Corruption Act (貪污治罪條例) prescribes a penalty of not less than five years imprisonment.
However, the Banking Act’s (銀行法) Article 125-2, Paragraph 1 stipulates that a responsible person or staff member of a bank who violates their duty and damages the bank’s assets or other interests may be punished by imprisonment of between three and 10 years and those who, by such actions, gain unlawful income of at least NT$100 million (US$3.4 million) may be imprisoned for seven years.
Paragraph 2 further stipulates that when two or more staff members jointly commit such offenses, their punishment may be increased by up to one-half.
Even if this case cannot be dealt with in terms of offenses listed under the Anti-Corruption Act, if it were pursued as a special breach of trust under the Banking Act, those responsible would not be lightly punished.
Ching Fu applied for the joint loan arranged by First Commercial Bank based on its tender contract for building the minesweepers, but as the shipbuilding deal involved national secrets, the bank could only trust the state’s endorsement and guarantees. This makes it questionable whether the auditing and decisions made by the bank were a dereliction of duty.
Furthermore, the offense of special breach of trust must involve the intent to gain illegal benefit for a private person or persons, or to damage the company’s interests. Even if there were numerous faults in the internal procedure for extending the credit, it would simply be a matter of negligence, and therefore unlikely to constitute the subjective elements of special breach of trust.
Based on the principle that when in doubt a court must rule in favor of the accused, regarding the case of the First Commercial Bank loan and the laxity of the bank’s internal control system, it is only possible to pursue the administrative and civil liability of those involved.
The minesweeper case shows that although the criminal penalties for financial crimes are not much lighter than those for corruption by public servants, that the constituent elements required to constitute such crimes tend to be rather strict — from both the legislative or judicial perspectives — makes it more difficult to obtain a conviction.
Wu Ching-chin is an associate professor in Aletheia University’s Department of Law.
Translated by Julian Clegg
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