The Supreme Court on Thursday ordered former CTBC Financial Holding Co vice chairman Jeffrey Koo Jr (辜仲諒) to be retried after overturning a High Court ruling that acquitted him on charges of breach of trust in a financial embezzlement case involving an offshore “paper company” named Red Fire Development.
The Supreme Court cited inadequate reasoning in the High Court’s decision, which had cleared Koo, 60, of allegations under the Banking Act (銀行法) and the Criminal Code despite causing significant financial losses to CTBC Bank.
However, it upheld the High Court’s ruling that acquitted Koo of money laundering and stock price manipulation. The decision is final.
Photo: CNA
Koo stepped down as vice chairman of CTBC Financial after he and other executives in the financial firm, including former CTBC Financial chief financial officer Perry Chang (張明田) and former CTBC Bank chief financial manager Lin Hsiang-hsi (林祥曦), were indicted in the case, nicknamed the “Red Fire” case, in 2006.
CTBC Bank in 2004 bought US$390 million worth of structured notes linked to Mega Financial Holding Co from issuer Barclays Bank PLC on instructions from Koo.
The purchase was made without approval from the bank’s board of directors, while the transaction was aimed at obtaining a stake in Mega Financial, prosecutors said.
However, CTBC Bank sold the structured securities at a lower price to Red Fire Development in what prosecutors deemed a “non-arm’s length” deal.
Koo and his executives manipulated Mega Financial’s share prices so Red Fire Development, which had been capitalized at just US$1, earned about NT$1 billion (US$31.32 million) in profit, the prosecutors said.
After the transaction, Red Fire Development wired the proceeds to several other offshore companies so that the illegal funds would not be traced, they added.
The prosecutors said Red Fire Development was not part of CTBC Financial and that Koo’s move to dispose of the structured bonds aimed to enable the paper company to make profits and caused a massive financial loss to the firm.
The High Court in December also found Chang and Lin not guilty of breach of trust, money laundering and stock price manipulation.
Koo, Chang and Lin were not found to have disposed of the structured bonds to Red Fire Development for their own interests, the High Court said in its ruling last year, adding that the transaction did not demonstrate their intent to hurt CTCB Financial’s interests.
However, the Supreme Court has ordered a retrial of Chang and Lin for breach of trust.
The Taipei District Court in 2010 found Koo guilty in the Red Fire case, citing the Securities and Exchange Act (證券交易法) and the Banking Act, handing Koo a nine-year sentence.
After an appeal, the High Court in 2013 ruled on the case, sentencing Koo to nine years and eight months in jail and imposing a fine of NT$150 million.
Then the Supreme Court in 2014 struck down the 2013 High Court ruling and ordered a retrial.
The High Court in 2018 handed Koo a sentence of three years and six months after he returned his illegal income from the scandal.
The High Court in 2021 reheard the case after a trial order from the Supreme Court, and ruled that Koo and his executives were not guilty of breach of trust or stock price manipulation.
The High Court in 2022 was ordered by the Supreme Court to rehear the case again and in December last year found Koo not guilty of breach of trust, money laundering and stock price manipulation.
Koo, the oldest son of the late CTBC Financial founder Jeffrey Koo Sr (辜濂松), rejoined the board of directors of CTBC Financial in May after being appointed as one of the new directors.
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