The media are reporting that the Hsinchu and Taipei offices of United Microelectronics Corporoation (UMC), the worlds second largest contract chipmaker, have been searched by prosecutors in relation to allegations about insider trading that took place in 2006. The Taipei Times reports:
Taiwanese prosecutors yesterday raided offices at United Microelectronics Corp (UMC, 聯電), the world’s second-largest custom-chip maker, as part of a probe into insider trading.
Prosecutors are investigating transactions that took place around April to July 2006, Lo Hsueh-mei (羅雪梅), a spokeswoman for the Hsinchu District Prosecutors’ Office, said by telephone yesterday.
A public relations official at UMC confirmed to the Taipei Times that the company’s Hsinchu headquarters and its Taipei office were searched yesterday afternoon over some of the company’s re-investments.
But the official, who requested anonymity, did not clarify which re-investments prosecutors were investigating nor confirm that the raid was connected to the insider trading probe.
The business news Web site cnYes.com said last night that the probe could be related to UMC’s purchases of shares of ProMOS Technologies Inc (茂德科技), the nation’s third-largest maker of computer memory chips, in 2006. It did not cite sources.
News of the raid came on the same day the company announced it would spend as much as NT$4.21 billion (US$134 million) to buy back 1.51 percent of its shares on the open market to prop up distressed share prices.
This is just another scandal in the long history of UMC. A few years ago the then Chairman Robert Tsao was accused of (and later acquitted) of not disclosing information about investments in China a few years ago. Robert Tsao was one of the early and youngest stars of the Taiwan tech sector and the allegations led to his early resignation and the rise of Jackson Hu to Chairman (Jackson Hu recently resigned from the position. See Jackson Hu Takes a Step Back at UMC ). The International Herald Tribune wrote at the time:
United Microelectronics Corp., the second-biggest supplier of made-to-order semiconductors, has challenged Taiwan prosecutors to indict its chairman, Robert Tsao, to clear up allegations of wrongdoing relating to He Jian Technology, a company based in Suzhou, China.
"In order to eliminate disputes arising from the He Jian case, we would like to ask the Hsinchu District Prosecutor's Office to indict Chairman Robert Tsao as soon as possible" for any wrongdoing, UMC said in an open letter published Wednesday on the front page of the China Times newspaper.
A United Microelectronics spokesman, Alex Hinnawi, confirmed that the letter had come from the Hsinchu-based company. He declined to elaborate. Tsao was unavailable to comment, according to his secretary, as was a spokesman for the Hsinchu District Prosecutor's Office, Tsai Tien-yuan.
Tsao was questioned by investigators on June 9 after being fined 3 million Taiwan dollars, or $95,600, by Taiwan's Financial Supervisory Commission in April for breaching securities laws with late disclosure of information relating to He Jian.
UMC said in March that it would receive a 15 percent stake in He Jian, worth more than $110 million, in compensation for "past assistance" and for anticipated cooperation. The companyearlier had denied that it had an investment in He Jian.
Earlier this month the Chairman of Powerchip, Frank Huang, was also indicted for insider trading. The China Post wrote:
Powerchip Semiconductor Corp., Taiwan's biggest maker of computer-memory chips, fell the most yesterday in more than five years after prosecutors indicted Chairman Frank Huang for insider trading and breach of trust. Powerchip tumbled 7 percent, the daily limit, to close at NT$6.68 on the Taiwan Stock Exchange, the biggest decline since June 23, 2003. The benchmark TAIEX index lost 0.3 percent.
Huang, 58, profited from a share sale in Macronix International Co. based on insider knowledge, and breached shareholders' trust by using company funds for renovations and furniture for his residence in 2003 and 2004, the Hsinchu District Prosecutors Office said on its Web site Thursday.
Taiwan prosecutors are seeking a jail term of four years and six months and a NT$60 million fine for Huang. Powerchip denied the allegation.
Who knows what these people were thinking or why they were targeted. They are two fairly big companies and have been around for a long time. They should know better. It will be interesting to see how these two cases pan out.
Taipei Times: UMC headquarters, Taipei office raided over ‘insider trading’
International Herald Tribune: UMC lays down challenge over He Jian
China Post: Powerchip shares fall after chairman Huang indicted
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