Prosecutors yesterday detained two people in connection with a financial scandal that has sent shockwaves through Taiwan's political system, and has even begun to affect cross-strait ties.
Chia Hsin Food and Synthetic Fiber Co (嘉新食品化纖) general manager Wang Lin-i (王令一) and Union Insurance Co (友聯產險) president Frank Wang (王事展) were held on suspicion of violating the Securities and Exchange Law (證券交易法).
The detentions came as authorities investigated the parent group of the companies, Rebar Asia Pacific Group. The Rebar Group's chairman, Wang You-theng (王又曾), fled to China on Dec. 30 with his wife, and is suspected of having embezzled millions of dollars from the group.
Lin-i is Wang You-theng's son, while Frank is his younger brother.
They were the first two people to be detained in the Rebar case.
"We found it necessary to detain the two defendants as they are suspected of having earned more than NT$100 million [US$3 million] from illegal transactions. They face more than seven years in prison." said Fred Lin (
Kuo Chi-ling (
Prosecutors are also probing whether operations in dozens of other units in the group run by family members involved irregularities such as insider trading, breach of trust and forgery.
Prosecutors have ordered about 40 members of the Wang family and the conglomerate's top executives to remain in the country pending investigation.
The scandal began to unfold after a bank run last Friday quickly turned into a wide-ranging criminal investigation into financial malfeasance.
The scandal has threatened thousands of jobs and has erased millions of dollars of wealth on the stock market.
The run on The Chinese Bank (中華銀行) began after China Rebar Co (中國力霸) and Chia Hsin Food and Synthetic Fiber, all under the parent Rebar Asia Pacific Group (力霸亞太企業集團), filed applications for insolvency protection on Dec. 29.
Wang You-theng fled to China the next day.
The firms failed to notify the Taiwan Stock Exchange Corp of their insolvency claims immediately -- as required under financial regulations -- postponing notification until last Thursday.
Approved
The companies' request to the Taipei District Court for insolvency protection was approved on the same day.
The Central Deposit Insurance Corp (
Chia Hsin Food and Synthetic Fiber is suffering from a NT$19.9 billion debt stemming from losses in its man-made fiber business.
China Rebar, an insurance, financing, broadband and TV shopping business which acts as a guarantor for Chia Hsin Food and Synthetic Fiber, has debts worth NT$20.7 billion.
The Taiwan Stock Exchange has also announced that 41 listed companies had suffered losses of NT$3.11 billion from investments in Rebar's Asia Pacific Broadband Telecom Co (
The Rebar Group employs more than 5,000 people, many of whom took to the streets to try to protect their jobs, saying that authorities' decision to freeze the assets of the two troubled firms will force employees out of work.
In related news, the Chinese Nationalist Party (KMT) yesterday announced that it would cancel Wang You-theng and his wife's party memberships. It also suspended Frank Wang's central standing committee membership.
The KMT decided that action should be taken immediately, as the scandal had damaged its reputation.
"As a responsible opposition party, the KMT made a quick and necessary decision in response to the scandal. We hope that the DPP will solve the incident and stop dragging the KMT into the Rebar scandal," KMT Spokesman Huang Yu-cheng (
Additional reporting by Mo Yan-chih
also see stories:
Premier calls on China to hand over Rebar fugitive
President asks Su Tseng-chang to conduct inquiry
Legislature likely to pass bill on debtor disclosure
Asia Pacific Telecom `on track'
CLA vows to protect Rebar employees
Banks refuse loan to Rebar-linked Eastern Multimedia
Union Insurance attempts to allay clients' concerns
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