Former vice chairman of Chinatrust Financial Holding Co (中信金控) Jeffrey Koo Jr (辜仲諒) was yesterday sentenced to nine years in jail by the Taipei District Court for his company’s illegal purchase of a stake in Mega Financial Holding Co (兆豐金控).
In its ruling, the court said Koo had violated the Securities Exchange Act (證券交易法) and the Banking Act (銀行法).
The court said Koo and several company executives used NT$27.5 billion (US$892 million) to buy a 9.9 percent stake in Mega Financial through a Hong Kong branch of Chinatrust in 2004, without the approval of the Chinatrust board.
That included the illegal purchase of US$390 million in loan notes, convertible into Mega shares, using money earmarked for deposits, and then locking in profits from the transaction through insider trading, it said.
The scam, known locally as the Red Fire Case after the name of the offshore company used to conduct the illegal acts, surfaced following prosecutors’ investigations into a bid by Chinatrust Financial to take over Mega Financial.
Red Fire Developments, capitalized at US$1, was set up in Hong Kong under Koo’s instruction, the ruling said.
Koo made US$30.47 million in profit from the illegal trading and did not return the profit to his company, harming the company’s interests, it said.
The court said Koo in 2006 returned US$20.9 million to a -Chinatrust branch overseas after the Financial Supervisory Commission (FSC) discovered the irregularity, but he still kept US$9.57 million in a Hong-Kong based front company controlled by the Koo family.
The court said Koo gave former president Chen Shui-bian’s (陳水扁) family NT$290 million in -connection with Chinatrust’s failed -takeover bid of Mega Financial Holding Co from the US$9.57 million as political donations.
Former Chinatrust chief financial officer Perry Chang (張明田), chief legal adviser Deng Yan-dun (鄧彥敦) and vice general manager Lin Hsiang-hsi (林祥曦) have also been convicted in the case.
Later yesterday, Koo’s lawyer said his client would appeal the ruling.
Additional reporting by CNA
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