Source: Deutsche Presse-Agentur
Time: March 15, 2006
Title: "Taiwan's electronics giant BenQ probed for alledged insider trading"

Summary: Taiwan's top financial regulator, the Financial Supervisory Commission, have proceeded to investigate alleged insider trading implicating electronics giant BenQ and have detained the CFO of the company over his alleged role in the scandal,prosecutors said Thursday.

The crime:

• "We are investigating if irregularity was involved in the sales ofthe BenQ's shares by senior company officials earlier in 2006," Chang Chin-feng, prosecutor based in the northern county of Taoyuan outsideTaipei, said by telephone.
• "Prosecutors searched the Taipei and Taoyuan offices ofBenQ on Tuesday, questioned seven officials and detained Yu the following day on suspicion of insider trading."
• "Six other officials were released on bail of between 200,000 and 5million Taiwan dollars (6,000-152,000 US)"
• Initial findings showed BenQ sold about 7 million company shares between January and early March last year, shortly before it reported operation losses of 9.06 billion Taiwan dollars (274.5 million US) for the fourth quarter of 2005.
  • BenQ's high-profile acquisition of Germany's Siemens AG'smoney-losing mobile phone unit in 2005 has resulted in 25 billionTaiwan dollars (781 million US) in company's losses in just a year,forcing BenQ to announce closure of the German unit.
• Before the quarterly losses were reported, BenQ's prices were well above 35 Taiwan dollars (1.09 US) per share, and after the company revealed its fourth quarter losses, share price dropped to around 25Taiwan dollars in March 2006. Chang said prosecutors are investigating if the sale of the shareswas executed under the instruction of top executives.

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Source: Financial Times
Time: March 16, 2007
Title: "BenQ Chair denies any wrongdoing"

• BenQ Corp.'s chairman K.Y. Lee yesterday released an open letter saying his company was not involved in insider trading as alleged by Taoyuan prosecutors: "We have been in business for 20 years. During this time, we have established a reputation for having honest and ethical corporate governance and have earnestly strived to ensure that integrity is the driving force behind all our actions," Lee said.
• Local media reported that Eric Yu, the company's vice president and CFO, secretly sold BenQ shares that were supposed to be kept by the firm for overseas stock options issuance purposes.
  • It was reported Yu sold the shares to BenQ's Malaysian subsidiary, CREO Venture Corp., which was reported to be a shell company. When BenQ's stock plunged in the wake of its failed Siemens investment bid, CREO was reported to have entered Taiwan's stock market as a foreign investor and heavily bought BenQ shares to raise their prices.
  • The media reported that Taoyuan prosecutors suspect Yu was a mere executioner in the case and implied that the mastermind behind this was Lee, who was reported to have been banned from leaving the country.
    • Both the prosecutors' office and BenQ Corp. said they were unaware of any travel ban on Lee.
  • "Negative media stories about Eric Yu are baseless and untrue. Everyone that has worked with Eric both inside and outside the company can attest to his integrity, honesty and ethical character," Lee said.
    • As for the nature of CREO, Lee said the company was established to process stock bonuses for BenQ's many overseas employees.

Effects:

• The investigation marked the second fiasco for BenQ after its failure to invest in Siemens to promote its brand. The investment caused BenQ to lose NT$20 billion and forced Lee to end the partnership.
• BenQ stock had been on a decline. But yesterday at mid-trade, the local bourse saw heavy buy orders for BenQ, driving its share price from its daily low to daily high. The shares closed at NT$13.95.
• Investors were wondering who went in to buy BenQ shares, and the local media pointed to three potential buyers: Hon Hai, Quanta Computer Inc., and AU Optronics, all with an interest in owning stakes in BenQ. All three have denied the reports.
• Rumors of hostile takeover bids on BenQ circulated in stock brokerage houses yesterday, as holdings of BenQ shares by the company's own management have fallen to less than eight percent, a sharp contrast with the 25 percent held by overseas shareholders. This means BenQ's management may be in trouble if overseas shareholders threw their support to management teams from other companies.