Supreme Court orders retrial of ex-CTBC vice chair in offshore scandal

Taipei, Sept. 6 (CNA) The Taiwan Supreme Court on Thursday ordered a retrial for former CTBC Financial Holding Co. Vice Chairman Jeffrey Koo Jr. (辜仲諒), overturning a high court ruling that acquitted him of breach of trust charges in a financial scandal involving an offshore "paper company," 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 and the Criminal Code for causing significant financial losses to CTBC Bank, the flagship banking unit of CTBC Financial.

The Supreme Court said the high court's ruling failed to give convincing reasoning for Koo's acquittal, adding that the lower court needed to make more efforts to figure out the facts in the case.

However, the Supreme Court upheld the part of the high court's ruling that acquitted Koo of money laundering and stock price manipulation. The decision was final.

Koo stepped down as vice chairman of CTBC Financial after he and other executives of the financial firm, including former chief financial officer of CTBC Financial Perry Chang (張明田) and former CTBC Bank chief financial manager Lin Hsiang-hsi (林祥曦), were indicted in the case, nicknamed "Red Fire" case, in 2006.

Back to 2004, through an overseas branch in Hong Kong, CTBC Bank bought a total of 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 aimed to take a stake in Mega Financial, according to prosecutors.

CTBC Bank, however, sold the structured securities at a lower price to Red Fire Development in what prosecutors deemed a non-arm's length deal.

In addition, Koo and his executives manipulated Mega Financial share prices so that the paper company, which had been capitalized at just US$1, garnered about US$30.47 in profit, according to prosecutors.

After the transaction, Red Fire Development wired the proceeds to several other offshore companies so that the illegal funds would not be traced, prosecutors said.

The prosecutors said Red Fire Development was not part of CTBC Financial and Koo's move to dispose of the structured bonds aimed to allow the paper company to make profits and caused a massive financial loss to the financial holding firm.

The high court also determined in December 2023 that Chang and Lin were not guilty of breach of trust, money laundering and stock price manipulation.

The high court said in its 2023 ruling that Koo, Chang and Lin were not found to have disposed of the structured bonds to Red Fire Development in their own interests.

The high court added that the transaction could not show their intent to hurt CTCB Financial's interests.

However, the Supreme Court has ordered a retrial of Chang and Lin on accusations of breach of trust.

The Taipei District Court found Koo guilty in 2010 in the Red Fire case, citing the Securities and Exchange Act and the Banking Act, handing Koo a nine-year sentence.

After an appeal, the Taiwan High Court ruled on the case in 2013, sentencing him to nine years and eight months in jail and imposing a fine of NT$150 million (US$4.70 million).

In 2014, the Supreme Court turned down the 2013 high court ruling and ordered a retrial.

In 2018, the high court handed down Koo a sentence of three years and six months after returning his illegal income from the scandal.

In 2021, the high court 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 and stock price manipulation.

In 2022, the high court was ordered by the Supreme Court to rehear the case again. The high court in a December 2023 retrial found Koo not guilty of breach of trust, money laundering and stock price manipulation.

On Thursday, the Supreme Court shot down the 2023 high court ruling concerning breach of trust, but upheld its decision clearing Koo of money laundering and stock price manipulation.

Koo, the oldest son of the late Jeffrey Koo, founder of CTBC Financial, rejoined the board of directors of CTBC Financial in May 2024 after being appointed one of the new board directors.

Over the past weeks, Jeffrey Koo Jr. was reported to have engineered an acquisition of Shin Kong Financial Holding Co.

In August, CTBC Financial announced it was competing with Taishin Financial Holding Co. for a takeover of Shin Kong Financial through a tender offer by acquiring a 51 percent stake in Shin Kong Financial in an initial stage before taking Shin Kong Financial completely into its corporate umbrella.

The combination with Shin Kong Financial is expected to make CTBC Financial the largest financial holding company in Taiwan with an asset of NT$13.5 trillion.