Cablegate: Umc Puts He Jian Stake in Trust As Investigations Continue

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

© Scoop Media