Democratic Progressive Party (DPP) lawmakers yesterday urged the National Communications Commission (NCC) to investigate an indirect investment by the Y.L. Lin Hung Tai Education Foundation in China Network Systems (CNS), as the deal reportedly involved funding from Chinese investors.
The commission had asked the foundation’s management to answer questions at its weekly meeting on Wednesday last week.
DPP legislators Wang Jung-chang (王榮璋) and Tuan Yi-kang (段宜康) yesterday called for further investigation, as the commission is scheduled to continue its review of the deal today.
Photo: Chu Pei-hsiung, Taipei Times
The foundation has a trust fund established by Hong Tai Group founder Lin Yu-lin (林育璘), who donated his personal assets of about NT$30.3 billion (US$986.8 million at the current exchange rate) for its creation — NT$167 million in cash and NT$30.14 billion in untraded stock, the lawmakers said in a presentation.
The tax-exempt organization has invested NT$8 billion to acquire CNS shares through multiple layers of subsidiaries, which would allow it to control a nearly 50 percent stake in the multiple system operator, they said.
The Ministry of Education, which supervises the use of trust funds for charitable purposes related to education, clearly indicated in an official response to a commission inquiry on Aug. 27 that the fund was not created to invest in for-profit deals, Wang said.
The foundation’s investment in acquiring CNS shares was disproportionate to its expenditure on charitable purposes, the ministry said, adding that the organization’s charitable business plan budgeted only NT$100 million for this year.
The commission is expected to approve the acquisition after the foundation last week promised to spend at least NT$4 billion over the next 10 years to promote media literacy and other educational causes, Wang said.
“The trust fund’s NT$30.3 billion should all be used for charitable purposes, rather than only NT$4 billion. The foundation cannot make an illegal deal legal by simply making a promise to the commission,” Wang said.
“The Ministry of Education and the Ministry of Justice are entitled to determine if the deal should be approved, and the commission should simply enforce what it is authorized to do by media regulations,” he said.
The DPP suffered major losses in the Nov. 24 nine-in-one elections, showing that the government’s reforms over the past two years did not generate their intended effects, Tuan said.
While the commission is an independent agency, it is still part of the government and the ruling party is responsible for its actions, he said.
The foundation must not disburse funds from the trust fund, which is stored at Cathay United Bank, without the consent of a consultation committee, whose executive director is Hong Tai Group chairman Lin Hong-nan (林鴻南), a son of Lin Yu-lin, and whose supervisor is Lin Shu-wang (林樹旺), a lawyer of the family, Tuan said.
This shows that the trust fund’s use has not been supervised by a independent body, he said.
The commission plans to give the deal a green light, because the foundation did not directly invest in CNS and the trust fund is stored at a bank, he added.
“I have also personally received information that the deal was forged by a person who has on multiple occasions tried to find investors to buy CNS and who has received investment from a fund under Alibaba Group,” Tuan said.
The commission should halt its review of the NT$51.5 billion deal and let the National Security Bureau investigate it, he added.
Hong Shun Investment Co, the listed buyer in the deal, said that the foundation did not invest in the purchase of stakes in CNS and that the acquisitions were carried out through two investment firms owned by the foundation.
The two investment firms donated their shares to the trust fund and later created two new investment firms, Hong Shun said, adding that the new companies used their own funds to establish Hong Shun to buy CNS.
The deal was an independent decision made by the investment firms, which sustain themselves through all kinds of investment and report their business to the government every year, it said.
The funds used to acquire the stakes in CNS were properly vetted by the bureau, which had indicated that there were no funds originating from China, it added.
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