ON Friday Yahoo posts this as UMC headline but not a SNDK headline. Un f*** believable.
Associated Press
Massive Taiwanese fraud case cripples prestigious law firm, shocks U.S.. tech company
Friday November 14, 8:20 pm ET
By William Foreman, Associated Press Writer
TAIPEI, Taiwan (AP) -- Eddie Liu worked at Lee and Li Attorneys-at-Law for 14 years and was trusted enough to handle key financial documents at the Taiwanese firm whose long list of clients has included IBM, Sony, McDonald's, Ford and Siemens.
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But Liu shocked the firm last month by disappearing after allegedly cashing in about 3 billion New Taiwan dollars (US$100 million) worth of stocks in one of Taiwan's biggest corporate fraud cases. The shares were owned by U.S. high-tech company SanDisk Corp. and were held in trust by Lee and Li -- one of the island's top law firms.
Liu and the money are still missing, and investigators believe he might have slipped overseas, possibly to China, after laundering much of the money by buying huge numbers of diamonds.
The apparent ease with which Liu allegedly embezzled the cash raises troubling questions about security and fraud safeguards in Taiwan -- one of Asia's most important corporate hubs. Some industry experts say it's another example of a high tolerance for white-collar crime on the island.
Photos of Liu show a middle-aged man with a pudgy, boyish face wearing oversized, clunky plastic-framed glasses, a white shirt, tie and dark suit. Liu, divorced with no children, looks like the legions of other salary men who stream to work each day in Taipei's financial district.
Although he wasn't licensed to practice law, Liu -- who joined the firm in 1989 -- became a senior staff member who focused on corporate issues and on mergers and acquisitions.
"Unfortunately, we trusted him," said T.C. Chiang, a partner at Lee and Li.
The firm announced the alleged crime in a brief, four-paragraph statement posted on its Web site on Oct. 15. SanDisk, which makes flash memory cards for cameras, also mentioned the scam in a separate announcement attached to its third-quarter earnings report last month.
The companies and investigators have declined to discuss the case in detail, saying they don't want to jeopardize leads in the investigation.
But they allege that Liu secretly sold 121 million shares of United Microelectronics Corp. -- Taiwan's second biggest chip maker. The stocks were owned by SanDisk, based in Sunnyvale, California.
"We are shocked that he should have done this to the firm and his colleagues," Lee and Li's statement said.
A high-ranking official involved in the case at the Taipei Investigation Bureau alleged that Liu laundered some of the money by buying a large number of diamonds.
The official, speaking on condition of anonymity, also said Liu wired about NT$2.2 billion (US$64.7 million) to accounts in Hong Kong, and so far Taiwanese officials have been unsuccessful in getting Hong Kong to freeze the accounts.
Liu's passport has been canceled, but he apparently left Taiwan on a forged document, the official said, adding that "the chances are high that he might be in China," a popular place for Taiwanese fugitives.
Investigators believe that someone might have helped Liu, and they are checking out possible suspects, the official said. "It just looks too easy," he said. "Could one person do all this? We're still investigating."
The question of accomplices helps introduce a twist to the story. Liu's father, Liu Jong-hsien, is also on Taiwan's wanted list after fleeing the island 10 years ago while facing bank fraud charges. Investigators haven't ruled out the father as a suspect.
Eddie Liu's alleged heist was a symbol of a broader problem in Taiwan: a general lack of safeguards against fraud, said Joe Papenfuss, manager at Pinkerton Consulting Services Taiwan Ltd., which specializes in corporate security.
Papenfuss said companies can prevent such fraud by establishing a system of checks and balances that doesn't allow any single employee to have direct access to documents and key assets. People should only be able to handle such valuables in the presence of others, he said.
"You can't let someone have access to US$100 million all by themselves," he said.
Papenfuss said that a lax attitude exists in Taiwan partly because the island doesn't take white-collar crime seriously. Violent crimes are investigated vigorously, but corporate crimes are often viewed as a case of a clever person beating the system, he said.
"If you're smart enough to do it and get away with it, more power to you," he said, describing what he calls a common Taiwanese attitude.
Chiang, the Lee and Li partner, said the firm has an internal control system, which he declined to describe. He said that at some point, the firm had to have faith in senior staff members like Liu.
But he acknowledged that "we have problems because we didn't find the violations soon enough."
Chiang says the firm will return SanDisk's money, but now it's priority is tracking down Liu.
Local media have reported that banks have been unwilling to loan the firm money so that it can compensate SanDisk, and that Lee and Li's future seems uncertain. The firm could break up as the crisis drives away its lawyers and its clients.
But Chiang said he was confident that the damage could be repaired and that getting loans wouldn't be a problem.
"We've contacted several banks," he said. "The response from the banks was all positive."
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