The value of the Central Motion Picture Corp (CMPC, 中央電影公司) was seriously underestimated when it was sold by a holding company owned by the Chinese Nationalist Party (KMT) in 2006, suggesting inappropriate property transfer, a report by the Ill-gotten Party Assets Settlement Committee said.
The KMT used to own a majority of CMPC shares until 1991, when it transferred all its shares to KMT-founded Hua Hsia Investment Holding Co (華夏投資公司), which was later sold to Central Investment Co (中央投資公司), another KMT-founded holding company.
Central Investment in April 2006 sold 82.57 percent of its CMPC shares to Lor Yu-chen (羅玉珍) and Chuang Wan-chun (莊婉均) at NT$65 per share, totaling NT$3.14 billion (US$103.9 million at the current exchange rate).
Photo: Chang Chia-ming, Taipei Times
Suspecting that CMPC was sold far below its value, prosecutors reopened an investigation into the transaction last month and former KMT legislator Alex Tsai (蔡正元) was detained for his role in the sale.
A committee investigation report released yesterday showed possible flaws in the method used to assess its value.
The share price was calculated according to CMPC’s book value per share of NT$72.49, multiplied by 1.09 (book value adjustment quotient) and 0.81 (share price adjustment quotient), with the committee expressing doubts about the reasonableness of the three figures.
The book value per share was mostly calculated based on the government’s “announced values” of CMPC properties, which were well below their real market values, so the book value of NT$72.49 per share “could not reflect the real value of the properties registered under CMPC,” the report said.
Accountant Lin Kuan-chao (林寬照), who assessed and verified CMPC financial records between 2005 and 2006, said that the estimated net worth of the company did not include the property value of five movie theaters, a printing factory and a dormitory, it said.
Accountant Chang Chin-yao (張錦耀), who assessed the transaction data and adjustment quotients, also said there were flaws in the estimation process.
The quotient of 1.09 was put forward by comparing CMPC’s financial structure with Taiyen Biotech Co (台鹽) and Taiwan Fertilizer Co (台肥), but it failed to take into account the fixed assets to net worth ratios of the two companies, which differed largely from CMPC, thereby making the comparison unobjective, the report quoted Chang as saying.
The quotient of 0.81 was also made unobjectively, Chang said.
“0.81 was quite subjective. There is no issue of liquidity for publicly traded stocks, but it constituted a problem for CMPC shares, which were not publicly traded. Therefore, [we] shaved about 20 percent off [the CMPC share price], which was quite subjective,” Chang was quoted as saying.
A hearing is to be held on Wednesday next week to determine whether the KMT controlled CMPC and whether the party sold the company below its market value to hide the party’s assets from government surveillance.
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