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Viewing cable 06TAIPEI2098, UMC Puts He Jian Stake in Trust as Investigations Continue

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Reference ID Created Released Classification Origin
06TAIPEI2098 2006-06-19 08:44 2011-08-23 00:00 UNCLASSIFIED American Institute Taiwan, Taipei 
VZCZCXRO2955
RR RUEHGH
DE RUEHIN #2098 1700844
ZNR UUUUU ZZH
R 190844Z JUN 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 0752
INFO RUEHBJ/AMEMBASSY BEIJING 5329
RUEHGH/AMCONSUL SHANGHAI 0208
RUEHHK/AMCONSUL HONG KONG 6537
RUEHGZ/AMCONSUL GUANGZHOU 9390
RUEHSH/AMCONSUL SHENYANG 5264
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
 
UNCLAS TAIPEI 002098 
 
SIPDIS 
 
SIPDIS 
 
DEPT PASS TO USTR 
DEPT FOR EAP/TC 
USTR FOR ERIC ALTBACH 
 
E.O. 12958: N/A 
TAGS: ETRD ECON CH TW
SUBJECT: UMC Puts He Jian Stake in Trust as Investigations Continue 
 
REF: A) 05 Taipei 1924 
 
B) 05 Taipei 5045 
C) Taipei 85 
D) Taipei 543 
 
1.  At a June 12 shareholders meeting, Chairman Jackson Hu of United 
Microelectronics Corporation, Taiwan's second largest semiconductor 
manufacturer, announced that the firm had placed US$ 110 million 
worth of stock in He Jian Technology into a trust.  He Jian, a PRC 
semiconductor manufacturer, agreed to give UMC the shares, which 
account for 15 percent of He Jian's stock, in exchange for 
"administrative assistance" provided by UMC.  UMC has asked Taiwan's 
Ministry of Economic Affairs for guidance on how it can legally take 
ownership of the He Jian shares, but has not yet received a 
response.  Hu told shareholders at last week's meeting that as soon 
as Taiwan authorities give approval, UMC will resume its 
share-holding rights. 
 
2.  Former UMC Chairman Robert Tsao and former Vice Chairman John 
Hsuan, who were both indicted in January 2006 (ref C), still await 
trial on charges that they violated the trust of shareholders by 
secretly investing in He Jian.  Tsao was fined NT$ 3 million (about 
 
SIPDIS 
US$ 90,000) by Taiwan's Financial Supervisory Commission in April 
2005 for failing to promptly report dealings with He Jian to UMC 
shareholders (ref A).  MOEA's Investment Commission fined UMC NT$ 5 
million in February 2006 for illegally investing in He Jian (about 
USD 150,000) (ref D).  UMC has filed for appeal of the fine with 
Taiwan's Commission of Adminstrative Appeals. 
 
3.  Comment: The final resolution of the UMC-He Jian case will be an 
important signal of how the Chen administration will execute its 
"active management" policy for investment in the Mainland.  The July 
27-28 Sustainable Economic Development Conference (SEDC) may help 
the administration reach consensus on how to bring the case to 
closure.  End comment. 
KEEGAN