Taiwanese Victor Targets Vast Wealth Of Nationalist Party

By Jonn Pomfret, Washington Post, Thursday 23 March 2000 ; A19

TAIPEI, Taiwan, March 22—Marble and chrome on the inside, pink sandstone on the outside, the Nationalist Party’s mammoth headquarters here cost $80 million to build. But in recent days, the building has been surrounded not by admirers but by demonstrators infuriated over the Nationalist defeat in Saturday’s presidential election, and the party soon could come under even greater pressure.

President-elect Chen Shui-bian has promised to turn his sights onto something even more valuable to the long-ruling Nationalist Party than its lofty headquarters—a multibillion-dollar treasure chest. The 49-year-old former maritime lawyer’s main campaign promise was to clean up Taiwan’s black gold—the nexus of official corruption, organized crime and politics that has dominated the political system since the Nationalists fled here from the Chinese mainland in 1949.

Chen has vowed to dismantle a Nationalist business empire that arguably has turned it into the richest political party in the world. His success is critical to the democratization of Taiwan, because it would level the political playing field. Since open elections began here in the late 1980s, they have been dogged by allegations of vote buying and other financial shenanigans, mostly by the Nationalists.

Chen’s crusade will not be easy. The Nationalists still control Taiwan’s legislature, and they are not about to willingly pass legislation that would gnaw away at their bankroll. Moreover, Taiwanese law states that after 10 years, stolen property does not have to be returned.

Chen’s battle also could have repercussions in the United States, where Nationalist money has been used to try to influence Capitol Hill. While the Taiwan government funds at least 10 lobbying operations in Washington, the party also has its own channels in the U.S. capital. The most public of these is a $4.5 million contract signed in 1994 between a Nationalist-run institute and the Washington lobbying firm of Cassidy & Associates. The firm, now part of Shandwick International, played a key role in securing President Lee Teng-hui a visa to the United States in 1995 and lately has lobbied Congress for passage of the Taiwan Security Enhancement Act. The contract runs out this summer.

Beijing-based academics say Chen’s efforts will be studied there as well. The Chinese Communist Party’s power is also rooted in a business empire, China’s state-owned enterprises; watching how Chen takes on the Nationalists’ assets could provide a model for reformers in Beijing.

The headquarters building in Taipei is just the symbol of a web of businesses owned by the Nationalist Party, also called the KMT for Kuomintang, a transliteration of its Chinese name. The enterprises span the globe, from banks and real estate in Taiwan, to fishing plants in Alaska, a lobbying operation in Washington, a farm in Israel, a five-star hotel on the Pacific island of Palau, a shrimp plant in Australia and investments in South Africa, Thailand, South Korea, Singapore and Japan.

Darby Liu, secretary general of the KMT Business Management Committee, estimates that Nationalist assets, including seven holding companies and real estate, are worth $3.7 billion and produce profits of $400 million a year. A recent book, published by a respected business magazine called Wealth, places the value of the assets at $20 billion.

Among Nationalist holdings in Taiwan are the island’s largest radio station, one of its three main television networks and a daily newspaper. During the election campaign, they all favored Lien Chan, the Nationalist candidate, who won only 23 percent of the vote. Chen’s Democratic Progressive Party says it has about $8 million in assets. Its headquarters occupies three floors of a low-rent office building, for which the party pays $7,000 a month.

The Nationalists’ business empire took root in China before they were forced off the mainland in 1949 after a lengthy civil war with Mao Zedong’s Communists. The party owned banks and factories, including the famous Tsingtao brewery. Arriving in Taiwan, the party impounded millions of dollars in property that had been owned by the Japanese, who occupied the island prior to end of World War II, including a string of movie theaters that the Nationalists operate to this day.

Later on, the Nationalist government created monopolies for party-run businesses. Party-owned Fuh-Hwa Securities had a monopoly on margin lending for equities until the early 1990s; Chung Hsing Bills Finance was one of only three companies authorized to underwrite commercial bonds. Party-owned companies had ironclad contracts with the military, and a party-owned firm monopolized distribution of propane gas to households throughout the island.

The party also invested in areas of Taiwan’s economy that no one else would touch but in which progress was needed, such as petrochemicals, financial services and information technology. With the lifting of martial law in 1987, the party began to reform its empire. Monopolies ended. In 1993, President Lee appointed a Taiwanese economist, Liu Tai-ying, to run the party’s businesses.

Liu combined the sophistication of a modern mogul with the street smarts of a party operative. He removed the party from many money-losing enterprises, moved cash into publicly listed firms and created an aggressive venture capital program at home and abroad. It was Liu who handled the contract with Cassidy & Associates and oversaw party investments in the United States, such as the Alaskan fish-packing plant.

During the recent presidential campaign, Lien promised that his party would move its assets into blind trusts. But to many in Taiwan, that was not enough. The Nationalists would still be the beneficiaries of at least $400 million a year in profits.

A law that would force all political parties to issue financial reports and treat them like listed companies—and also ban them from directly operating for-profit enterprises or media businesses—is languishing in the Legislative Yuan, the parliament.

Cheng Pao-ching, a legislator from Chen’s party, said he is preparing legislation to deal specifically with the liquidation of Nationalist Party assets. In his office, Cheng displayed stacks of documents that he said chart the movement of government money into Nationalist accounts. They stole it, he said, so they should return it. I’m not going to rest before society gets this money back.

The man who could hold the key to this issue is James Soong, a maverick presidential candidate who broke with the Nationalist Party and came in second in the election. During the campaign, Soong was accused of stealing $7 million in Nationalist Party funds when he was the party’s general secretary in the 1990s. It was that scandal that propelled this issue to the forefront of the campaign. Soong is contemplating forming an independent political party made up of alienated Nationalist legislators. How his backers vote on this issue could determine its success.

Edward Shih, a prominent Taipei accountant, is not optimistic. The KMT is still powerful, he cautioned. In the end, much of this money will remain theirs.