Prosecutors probing NT$120 billion CAL aircraft purchase

Prosecutors probing NT$120 billion CAL aircraft purchaseBILLION-DOLLAR DEAL:

Authorities will investigate whether the CAL chairman was overly hasty in signing an agreement to buy up to 20 Airbus A350-900 aircraft STAFF WRITER, WITH CNA Thursday, Apr 03, 2008, Page 12

Prosecutors have begun a probe into suspected irregularities in a major aircraft purchase by China Airlines Ltd (CAL, 中華航空), Taiwan’s largest air carrier, the director of the Special Investigation Unit of the Supreme Prosecutor’s Office said yesterday.
Chen Yun-nan (陳雲南) said the investigation was prompted by recent reports of alleged irregularities in CAL’s NT$120 billion (US$3.97 billion) deal with European aircraft manufacturer Airbus to buy 20 A350-900s.
“The prosecutors have questioned CAL and China Aviation Development Foundation (航發會) personnel,” Chen said.
The foundation is CAL’s largest shareholder.
His remarks came as Next Magazine reported yesterday that CAL chairman Ringo Chao (趙國帥) had been overly hasty in signing an agreement to buy aircraft that were still in development and would not be delivered until 2015.
Airbus’ price was NT$16 billion more than the maximum price set by former CAL chairman Philip Wei (魏幸雄), reports said.
Chen said prosecutors understood that Airbus would begin delivery of 14 of the 20 aircraft ordered in 2015, to replace CAL’s six A340-300 passenger aircraft. The deal included an option to buy a further six aircraft, he said.
Prosecutors had reviewed information provided by CAL and the foundation, and summoned personnel for questioning, Chen said. He said they would seek to determine whether the deal ran counter to common practices — for example, because the downpayment was unusually high.
“Prosecutors are investigating the possibility that the deal involved breaches of trust, dereliction of duty and or embezzlement,” Chen said.
Chinese Nationalist Party (KMT) legislators yesterday questioned Transportation and Communications Vice Minister Oliver Yu (游芳來) and Civil Aeronautics Administration Director-General Billy Chang (張國政) over the matter, but both said they “were not aware of the financial arrangements involved in the purchase.”
Yu, a board director of China Aviation Development Foundation, said CAL had submitted the deal to the foundation for consideration at a board meeting in December. The meeting had approved the deal out of respect for CAL’s professionalism, he said.