Government vows appropriate punishment in navy procurement case

  • Date: 2017-11-02
  • Source: Department of Information Services, Executive Yuan
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Vice Premier Shih Jun-ji today called a press conference to release the results of an Executive Yuan task force investigation into issues surrounding alleged fraudulent borrowing by the winning contractor in a Ministry of National Defense minesweeper procurement case. With losses for the lender banks potentially reaching NT$20.1 billion (US$665.9 million), there is clearly considerable room for improvement in military procurement procedures, as well as with credit assessment, credit extension and money laundering prevention by banks when making syndicated loans. Vowing that no punches would be pulled, the vice premier said that the mistakes of the case must be reviewed and improvements identified, with degree of responsibility determining ultimate punishment.

To bring clarity to the case, on October 17 of this year Premier Lai Ching-te established a task force to investigate the minesweeper procurement process itself, problems with the loan syndication banks, potential fraudulent loan activity and illegal money transfers by the firm awarded the shipbuilding contract, Ching Fu Shipbuilding Co., and whether or not high-level officials intervened in the loan syndication process.

With respect to fund transfers following the alleged fraudulent loan by Ching Fu, Vice Premier Shih said that NT$4.93 billion (US$163.4 million) of the original syndicated loan was transferred to five questionable suppliers in Hong Kong, Macau and Singapore. The purported use of these funds awaits further investigation. However, NT$1.3 billion (US$43.1 million) of the amount transferred abroad has since been moved back to Taiwan into accounts controlled by firms or people associated with the shipbuilder.

The vice premier identified five directions for future improvements: First, standard operating procedures will be established for military procurement. Second, exceptionally large military procurement projects will be subject to enhanced audits. Third, credit assessment and credit extension evaluation mechanisms for syndicated loans, as well as post-loan management, will be improved. Fourth, the feasibility of triparty contracting and systems for formal notification among contracting parties will be considered. Fifth, supervision of publicly controlled banks will be strengthened.

The repercussions of the case for national defense and the financial sector are great, said Vice Premier Shih, and have drawn scrutiny from legislative bodies and the people at large. Since Premier Lai initiated the administrative investigation, the task force moved quickly to complete its work in just 19 days. The results of the task force’s report together with related files and evidence will now be forwarded for further action by investigative units. The painful lessons of this case will be top of mind as the Executive Yuan proceeds with the careful review and forceful improvements required to ensure that similar mistakes will not be repeated.