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Taiwan – Recent Anti-Corruption Developments.

30 July, 2012

 

Overview
 
Taiwan has made significant progress in its fight against corruption over recent years. There is an increasing public perception that the current regime is serious about tackling the issue, based not only on its strong public statements, but also on a recent number of high profile prosecutions. These include the conviction and imprisonment of former President Chen Shui-bian on counts of bribery and embezzlement, and the indictment of the previous president, Lee Teng-hui, on corruption charges. Senior customs officials and judges have also been targeted.
 
This progress was reinforced by the establishment of the Agency Against Corruption (“AAC”) in May last year. It opened with a staff of 180 officials drawn from the ethics departments of government agencies and the police and will focus on enforcement and education in the community.
 
Recent international corruption cases
 
A French defence company
 
One of the highest profile corruption cases involving foreign parties in Taiwan made headlines again in 2011 as a French defence company, along with the Government of France, paid a multi-million dollar arbitral award following a dispute that spun out of an investigation into corruption in France and Taiwan.
 
The dispute arose out of commission payments exceeding US$600 million allegedly paid in 1991 by the company’s predecessor entity. These payments were purportedly made to a Taiwanese agent in relation to the sale of six French frigates to Taiwan at a cost of US$460 million each. Suspicions about the deal arose after the body of the Head of Procurement for the Taiwanese navy was found dead off the Taiwanese coast in 1993.
 
The Public Prosecution Service (France) initiated an investigation into the company for bribery, but dropped the case in 2008 due to lack of evidence. Nevertheless, Taiwan commenced proceedings with the ICC seeking damages on the basis that the company breached the prohibition on the payment of commissions in the frigates purchase contract.
 
On 3 May 2010, the Tribunal ordered the company to pay approximately US$591 million in damages (including interest and legal expenses) to the Taiwanese government. In June 2011, the Paris Court of Appeals affirmed the award, and ordered the company to pay US$913 million. The company did not appeal the ruling and paid the award (with the French government contributing 72.5% pursuant to a guarantee in July 2011).
 
The Government of Taiwan announced on 12 October 2011 that it was seeking additional compensation from France. Defence Minister Kao Hua-chu said that the Navy has filed a legal suit against France, claiming NT$3 billion (US$98.84 million) in compensation and interest for an alleged violation of a separate supply contract.
 
A global telecommunications company
 
A global telecommunications company resolved FCPA violations by agreeing to pay US$137 million to the SEC and DOJ for violations in Taiwan, Honduras, Costa Rica and Malaysia. In Taiwan, the company allegedly hired two consultants to funnel nearly US$1 million to members of the Taiwanese legislature in order to influence the award of a tender by the Taiwan Railway Administration.
 
Recent domestic corruption cases
 
Chen Shui-bian (ex-President of Taiwan)
 
The most high profile bribery conviction in recent years was that of Chen Shui-bian, the ex-President of Taiwan, who was sentenced to life in prison in September 2009 after a Taiwanese court convicted him on graft charges. He resigned from Taiwan’s Democratic Progressive Party in August 2008 after admitting that his wife Wu Shu-chen had wired US$21 million in campaign funds to accounts in Singapore, the Cayman Islands and Switzerland. Mr Chen was charged with embezzling US$3.15 million during his 2000-2008 presidency from a special presidential fund, receiving bribes worth at least US$9 million in connection with a government land deal, laundering the proceeds of graft through Swiss bank accounts, and forging documents to cover up his crimes. Mr Chen’s wife was also sentenced to life in prison on related graft offences. Both were fined a total of US$15 million.
 
Chen Jung-ho, Lee Chun-ti and Tsai Kuang-chih (three high-court judges)
 
Three high-court judges (Chen Jung-ho, Lee Chun-ti and Tsai Kuang-chih) received prison sentences of between 11 and 20 years in July 2011 for accepting bribes to fix the outcome of a high-profile case involving Mr Ho Chih-hui. According to Taipei District Court documents, in May 2010, Mr Ho’s agent paid the judges for a not-guilty verdict on charges of taking kickbacks over the building of a science park. This high profile scandal played a role in President Ma Ying-jeou’s recent decision to set up the AAC.
 
 

For further information, please contact:

 

Mark Johnson, Partner, Herbert Smith

mark.johnson@herbertsmith.com 

 

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