A recent court ruling against Hsinyutai Co (欣裕台股份有限公司), a spin-off of the Chinese Nationalist Party’s (KMT) investment company — Central Investment Holding Co (中央投資) — which sued the buyers of Central Motion Pictures Corp (CMPC, 中影) for NT$2.5 billion (US$85.9 million), has once again stirred public doubts about the ruling party’s assets.
While the ruling by the Taipei District Court can still be appealed, details rendered in the ruling, handed down on Nov. 30 last year, once again highlighted questions over the KMT’s disposal of its assets.
The assets have long been a topic of controversy, with President Ma Ying-jeou (馬英九), who was then the mayor of Taipei, promising to liquidate the assets and ensuring transparency when he first became party chairman in 2005.
The Central Investment Holding Co is the last KMT-owned business, after it sold the building housing the party’s Institute on Policy Research and Development (國發院) for NT$4.3 billion, and the China Television Co (中視), the Broadcasting Corp of China (中國廣播公司) and the CMPC to the then-China Times Group (中時集團) for NT$9.3 billion in 2005. The sale of the CMPC alone was worth NT$3.1 billion.
The KMT has failed in four separate attempts to sell Central Investment Holding Co — in 2006, February 2009, June 2010 and in January 2011.
The sale of the CMPC to Lor Yu-chen (羅玉珍) and Chuang Wan-chun (莊婉均) resulted in a dispute, with both sides trading accusations.
On April, 28, 2009, the Central Investment Holding Co sued Lor and Chuang for allegedly failing to uphold their end of the contract.
The contract refers to a profit-sharing agreement between Central Investment Holding Co with Lor and Chuang, in which the latter agreed to help the holding company auction off the 12 properties owned by the company, with an estimated value of NT$9.8 billion.
According to the ruling, the contract stated that should CMPC sell off the building located on Taipei’s Bade Road, the New World Building (新世界大樓) near Ximending (西門町) and the Chinese Culture and Movie Center (中影文化城) in Shilin District (士林), Lor and Chuang would have to pay the Central Investment Holding Co a sum of the profits after deducting taxes and transactions fees.
The floor price for the Bade Building was set at NT$1.5 billion, with the KMT getting 82.56 percent — the size of its original stake in CMPC — of the profit; the New World Building’s starting price was set at NT$1.2 billion, with two-thirds of the profit multiplied by the KMT’s holding going to the party; and the Chinese Culture and Movie Center’s starting price was set at NT$2.6 billion, with half of the profit times the KMT’s holding being transferred to the party.
However, the contract also states that the profit-return clause was valid for only three years, and after three years, the seller, the Central Investment Holding Co, may not ask for any share of the profit.
The contract also states that if the profit-return clause has expired and CMPC is unable to sell any of the realty under its possession, the seller promises the buyer, Central Motion Pictures Co, to purchase the realty at the lowest price stated on the contract, with the same three-year terms, and place the ownership of the realty under a designated name of the seller’s choice.
The three-year term expired on April 26, 2009, but because Lor and Chuang were unable to sell the properties, the Central Investment Holding Co filed suit two days after the expiration of the agreement.
It sued Lor, Chuang and, as collateral, all the guarantors, for NT$2.5 billion in damages and an additional NT$140 million in delayed payment interest.
The administrative responsibilities of the Central Investment Holding Co had been divided in 2010, its spin-off company, Hsinyutai, stepped in and assumed all its powers in the law suit against Lor and Chuang.
However, the Taipei District court ruled that the CMPC itself had not signed the contract to sell the Bade Building and the other properties within three years, and according to the contract, the plaintiff can maintain that the defendant should, as soon as possible, purchase the Bade building at the lowest price, making it a priority purchase.
The defendant’s obligation to do so “does not have fixed time limit in which the action should be completed,” the court ruling said, with the judge ruling that Hsinyutai does not as yet have the right to petition for damages and ruling against it.
Additional reporting by Chang Wen-chuan
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