Ex-FAT chairman sentenced to 14 years for hollowing out company

Taipei, Sept. 30 (CNA) The Taipei District Court on Monday sentenced Chang Kang-wei (張綱維), former chairman of the now defunct Far Eastern Air Transport Corp. (FAT), to 14 years in prison after finding him guilty of embezzling corporate funds and other crimes.

He was also given another one-year sentence that can be commuted to a fine, according to the court, which also ordered the confiscation of his illegal gains of NT$3 billion (US$94.64 million).

The decision can be appealed.

Aside from embezzlement charges, Chang was also indicted on charges of fraud, special breach of trust, and violations of the Securities and Exchange Act, all involving his use of the airline to financially support other personal businesses unrelated to aviation.

The airline had struggled financially since the 2000s until late 2019 and early 2020, when it ceased operations and had its air operator certificate revoked. The problems were in part related to unscrupulous managers, especially Chang.

In 2008, FAT faced a financial crisis due to alleged illegal acts by another former Chairman Tsui Yung (崔湧) and other executives and filed a restructuring application with a local court which was later granted on Feb. 23, that year.

According to the Taipei District Prosecutors Office indictment, after the carrier announced bankruptcy, Chang took over the management of FAT in 2009 by producing falsified financial statements of his own business conglomerate Huafu Enterprise Holdings Ltd. and claiming that it had sufficient funds to invest in FAT.

After FAT emerged from bankruptcy restructuring in 2015, the airline quickly experienced a severe financial deficit the next year, in part due to Chang's maneuvers.

According to the prosecutors' indictment, in October 2015, Chang negotiated a NT$1.3 billion loan at a 6.5 percent interest rate for FAT, but then transferred that amount of funds to Huafu while leaving FAT saddled with the relatively high interest rate loan.

In addition, prosecutors alleged that Chang negotiated a NT$2.2 billion loan for FAT from Taiwan Cooperative Bank in July 2016, which he allegedly used to pay off loans of NT$2.25 billion owed by Huafu to Entie Commercial Bank.

He also continued to misappropriate more than NT$800 million in funds from FAT.

Facing an audit of FAT's accounts by the Civil Aviation Administration (CAA), Chang forged five receipts saying they were IOUs for funds lent by FAT to Huafu, prosecutors charged in the indictment.

But realizing that FAT was cash-strapped, the CAA ordered it recoup the NT$3.1 billion it was supposedly owed by outside parties.

Fearing that FAT would be fined by the CAA and have its flight schedule disrupted, Chang decided to bundle and transfer Huafu's "Xiaopingding" property development project in Tamsui to the airline, to satisfy the CAA's request and offset the NT$3.1 billion of receivables in FAT's accounts.

Chang did this, prosecutors said, despite knowing that sales of the project's units were sluggish.

As a result, the airline took over a large number of unfinished buildings and real estate that was difficult to develop and incurred significant losses, prosecutors said.