The Taipei District Court yesterday granted a request to detain Daily Air Corp chairman Kuo Tzu-hsing (郭自行), pending an investigation into allegations that he defrauded the government of NT$500 million (US$16.5 million) in subsidies.
Prosecutors and members of the Ministry of Justice Investigation Bureau (MJIB) on Wednesday raided eight locations, and detained Kuo and four other people for questioning.
Established in 1992, Daily Air is the only local carrier specializing in flights to the nation’s outlying islands.
Photo: Wang Hsiu-ting, Taipei Times
Taipei prosecutors said that Kuo would be charged with fraud, embezzlement and forgery, in addition to breaching the Business Entity Accounting Act (商業會計法).
The four others — Daily Air chief financial officer Lien Chi-cheng (連記誠) and three company employees — were released yesterday after posting bail.
Civil Aeronautics Administration (CAA) records showed that since 2005, Daily Air has received more than NT$100 million in annual government subsidies, or more than NT$1 billion in total.
The agency has also given the carrier more than NT$10 million every year for the past decade.
Prosecutors estimated that the company has, through fraudulent accounting, made more than NT$500 million in illegal profits over the years.
The Ministry of Transportation and Communications said it had issued the subsidies to Kuo, which he is suspected of having stashed away in banks overseas.
The subsidies were given as part of the ministry’s 10-year CAA program to provide financial assistance to the company, given the difficulty of operating unprofitable routes to serve residents in outlying islands.
However, inspections by the CAA aroused suspicions that the airline was fudging its aircraft maintenance and repair expenses.
CAA inspectors who checked Daily Air’s fleet cited discrepancies in reports submitted by the company and questioned whether some planes had undergone maintenance or repair at all.
Kuo denied any wrongdoing during questioning, insisting that there was no fraud involved.
He said that the company’s reports on maintenance and repair and other expenses were all within reasonable limits, and that they all met the legal requirements and conditions set by the CAA.
Problems with aircraft used by Daily Air have led to minor accidents in recent years, as one report said some of its aging airplanes have been in service for more than 20 years and are in urgent need of replacement.
However, the company chose not to use the subsidies for a major overhaul or replacement of problematic aircraft.
The ministry’s Department of Aviation and Navigation said it would not comment on a case under judicial process.
However, it added that it would ensure that transport to the outlying islands would not be suspended.
Asked if it would consider finding other carriers to take over the route should more problems involving Daily Air emerge, the department said that the CAA is in charge of all necessary measures.
So far, the airline is operating normally, it said.
Additional reporting by Shelley Shan
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