Corruption Trials Captivate Taiwanese

High-Profile Political, Corporate Cases Invigorate Country's Maturing Legal System

TAIPEI, Taiwan -- It's the age of the prosecutor in Taiwan, a shift that is shaking the business and political establishment and strengthening the rule of law in one of Asia's biggest economies.

In the latest round in an extraordinary series of prosecutorial actions, proceedings began last week in the trial of Ma Ying-jeou, a leading opposition politician accused of misusing government funds when he was mayor of Taipei between 1998 and 2006. Mr. Ma, widely seen as a front runner in next year's presidential election, denies wrongdoing.

A series of other investigations, indictments, and convictions in the last year have ensnared high-profile corporate and political figures. Among them: The wife of President Chen Shui-bian is on trial for allegedly misusing government funds; Mr. Chen's son-in-law was convicted of insider-trading charges; prosecutors issued an arrest warrant for banking giant Chinatrust Financial Holding Co.'s former vice chairman, the scion of a powerful Taiwan family, as part of a probe into allegedly illegal actions in a hostile takeover attempt; and prosecutors indicted the founder and chairman of Rebar Group, another powerful family conglomerate, for alleged embezzlement.

The slew of cases has fueled almost nonstop media coverage in Taiwan, captivating public attention. The probes, undertaken by public prosecutors akin to district attorneys in the U.S., have also prompted charges of political maneuvering and of overzealousness.

But many analysts say the assertion of prosecutorial and judicial power is also strengthening a legal system whose development has lagged behind broader political reform and economic growth in this island of 23 million.

"How to establish an independent judiciary is very important," says Antonio Chiang, a newspaper columnist who worked for several years as a senior official in Mr. Chen's administration. "A lot of prosecutors and judges want to prove they're independent, and sometimes they go too far," he says. "But overall, it's very healthy."

Taiwan's rapid transition from authoritarianism in the past two decades has made it one of the most vibrant democracies in Asia as it has also become a global corporate power. Despite efforts to retool the legal system, regulators and public prosecutors have often lacked the independence or clout to take on powerful figures, allowing unhealthy practices of the past to persist. Polls suggest much of the public sees the legal system as ineffectual or compromised -- although confidence appears to have risen in the past year.


The legal shift seems to flow in part from growing confidence among prosecutors as they have successfully taken on increasingly prominent targets and won public praise for doing so. Some cases have also been fueled by retaliatory disclosures by the island's bitterly opposed political parties. In the corporate world, recent events seem to be tied to a broader government push to make the island more attractive to foreign investors, who have long pushed for improved corporate governance.

The shift in Taiwan mirrors changes taking place in South Korea, another vital Asian economy that has transformed from authoritarian rule since the 1980s. Prosecutors there won a conviction in February on embezzlement and fraud charges against the chairman of Hyundai Motor Co. Many saw the decision as a landmark in a burgeoning push for better corporate governance at the country's powerful conglomerates. (See article on corporate governance in South Korea.)

In Taiwan, Chiang Kai-shek's Kuomintang, or Nationalist Party, ruled under martial law until 1987, after fleeing to the island from mainland China in 1949 amid a civil war with Mao Zedong's Communists. The legal system was long used simply as a political tool. The island's first presidential elections were held in 1996, ushering in an era of full-fledged democracy, but prosecutors and regulators often find themselves outgunned when taking on powerful political or business interests.

One sign of change is the conviction of President Chen's son-in-law. A Taiwanese court convicted Chao Chien-ming, husband of Mr. Chen's only daughter, of using inside information in trading shares in a government-controlled financial company. He was sentenced to six years in prison.

Two of the highest-profile political probes -- those of Mr. Chen's wife, Wu Shu-chen, and of the opposition politician, Mr. Ma -- were initiated by political opponents who publicized evidence of alleged wrongdoing. Mr. Ma's indictment on charges of misusing a Taipei discretionary fund forced him to resign as chairman of the Kuomintang, now the main opposition party. Both Ms. Wu and Mr. Ma have denied wrongdoing.

Lin Feng-cheng, chief executive of the Judicial Reform Foundation, a private anticorruption group, says the indictments are positive, even if they disrupt the political system by forcing resignations. "If politicians have to step down, that's a small price to pay," he said. "Raising society's sense of justice...is the most important thing."

The new prosecutorial zeal has also been felt deeply in Taiwan's business community. Traditionally, the island's stock market -- one of Asia's biggest by market capitalization -- was plagued by insider trading and other stock manipulation, and the laws and enforcement mechanisms to control them have been weak. Many of those in the island's legislature, which helps oversee regulatory agencies, were themselves executives or owners in firms under regulation.

Perhaps the highest profile corporate investigation is that of Chinatrust, a leading banking group controlled by the Koo family, which has been a major force in Taiwanese business and politics for more than a century. Last July, financial regulators fined Chinatrust 10 million New Taiwan dollars (US$302,000), for allegedly breaking rules in a complicated debt transaction that was part of Chinatrust's efforts to acquire control of another Taiwanese financial group. The day after the fine was announced, Jeffrey Koo Jr., son of the family patriarch and Chinatrust founder Jeffrey Koo Sr., quit as head of the company's bank, its largest unit.

The Taipei District Prosecutors Office followed with its own investigation into the transaction, which included raids on Chinatrust's headquarters. In November, prosecutors issued an arrest warrant for the younger Mr. Koo after he failed to return to Taiwan from overseas to answer questions. He then resigned his remaining post as vice chairman of Chinatrust. In February, authorities formally indicted three former senior Chinatrust executives, who remain employed by Chinatrust but who resigned their executive titles during the investigation, on charges of breach of trust and insider trading related to the takeover effort.

Mr. Koo, who remains a fugitive, couldn't be reached. His lawyer, Hung Kwei-san, declined a request for comment, citing the probe. Chinatrust's spokesman also declined to comment.

In some cases, prosecutors moved slowly -- only initiating probes after scandals surfaced that shook public confidence in Taiwan's financial system. They began a massive probe of Rebar Group, a family-run conglomerate with interests in everything from food to construction, after two group companies filed for bankruptcy protection in December, sparking a run on a bank the family controlled. Last month, the Taipei District Prosecutors Office indicted 107 people on embezzlement and other charges as part of the Rebar probe, including Wang You-theng, the group's 80-year-old founder. Mr. Wang fled the country. His lawyer didn't respond to requests for comment. Wang Lin-mei, a spokeswoman for the group, declined to comment.

Write to Jason Dean at [e-mail] and Chiu Piling at [e-mail]



FULL-COURT PRESS

• The Issue: Prosecutors in Taiwan have been increasingly aggressive, with investigations that are shaking up the political and corporate worlds.

• The Background: Reforms to Taiwan's legal system have trailed the island's rapid democratization.

• The Bottom Line: While the spate of investigations and court cases is angering some and causing disruptions, it is likely to lead to stronger rule of law in one of Asia's biggest economies.