CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 3889
OF 150845Z OCTOBER 87
INFO IMMEDIATE PEKING
CONFIDENTIAL
HKC 104/1
RECEIVED IN REGISTRY
20 OCT 1987
DESK OFFICER
Y
INDEX
PA
Action Taken
022747
MDHIAN 1136
TOP COPY Q DIST 7
KA WAH BANK PROSECUTION: EVIDENCE FROM TAIWAN
1. IN CONNECTION WITH THE RESCUE OF THE KA WAH BANK LTD (KWB) BY CHINA INTERNATIONAL TRUST AND INVESTMENT CORPORATION (CITIC) LAST
·
YEAR THE HONG KONG GOVERNMENT ENTERED INTO CERTAIN CONTRACTUAL OBLIGATIONS WITH CITIC. THESE INCLUDE GUARANTEEING THE RECOVERABILITY OF KWB LOANS OUTSTANDING ON 23 JUNE 1986 AND UNDERTAKING THEIR
RECOVERY.
2. THREE FORMER DIRECTORS OF THE KWB HAVE BEEN CHARGED WITH EIGHTY- ONE COUNTS, INCLUDING CONSPIRACY TO DEFRAUD, FALSE ACCOUNTING AND OTHER CHARGES. THE CASE WILL BE HEARD IN THE HIGH COURT, BEFORE A JURY. COMMITTAL PROCEEDINGS ARE EXPECTED TO START IN ABOUT THREE MONTH'S TIME. IN ORDER TO PROVE A NUMBER OF THE CHARGES, OUR LAWYERS JUDGE THAT DOCUMENTARY EVIDENCE IS REQUIRED FROM CERTAIN
TAIWANESE AUTHORITIES.
3. THE EVIDENCE CONCERNED RELATES TO A LOAN OF HK DOLLARS 80 MILLION IN NOVEMBER 1983 TO A COMPANY OF THE DEFENDANTS, ON THE SECURITY OF WORTHLESS SHARES IN A TAIWAN REGISTERED COMPANY, TAIWAN HOTELS CO. LTD (THC). THE DOCUMENTS REQUIRED ARE:
(A) THE RECORD OF OWNERSHIP FILED WITH THE LAND ADMINISTRATION OFFICE IN TAIPEI, TO SHOW THAT THC SOLD A PIECE OF LAND TO A NOMINEE IN FEBRUARY 1982 AND THAT THE LAND WAS THEN SOLD TO A THIRD PARTY IN MAY 1982.
(B) FROM THE COMMERCIAL DEPARTMENT OF THE MINISTRY OF ECONOMIC AFFAIRS, DIRECTORS AND SHAREHOLDERS RETURNS SHOWING THAT THE DEFENDANTS WERE DIRECTORS AND SHAREHOLDERS OF THC FROM 1979 TO 1982, AND MINUTES OF MEETINGS OF BOTH THE BOARD OF DIRECTORS AND SHAREHOLDERS SHOWING THE DEFENDANTS' DECISION TO WIND UP THC MARCH 1982 AND SELL ITS LAND.
IN
(C) FROM THE TAIPEI DISTRICT COURT, REPORTS FILED BY THE LIQUIDATOR OF THC TO SHOW THAT LIQUIDATION WAS COMPLETED BEFORE THE
1
PAGE
CONFIDENTIAL
3