Top UMC executives indicted in Taiwan

Bob Tsao and John Hsuan, two top executives from United Microelectronics Corp., the world’s second-largest contract chip maker, have been indicted in Taiwan over alleged illegal investments in a Chinese semiconductor company, He Jian Technology (Suzhou), UMC said in a statement released Monday.

Taiwan’s government has restricted the ability of Taiwanese chip makers to invest in Chinese semiconductor manufacturing operations for political reasons. China views Taiwan has a renegade province and has threatened to invade if the island declares independence.

News of the indictment, which was handed down by the Hsinchu District Prosecutor’s Office, came just hours after UMC announced the resignation of Tsao and Hsuan from the positions of chairman and vice chairman, respectively. Following their resignation, which came during a special board meeting on Monday, both Tsao and Hsuan were appointed as special advisers to the company.

Tsao was replaced as chairman by Jackson Hu, the company’s chief executive officer (CEO). Hu had been expected to eventually replace Tsao.

In December, Tsao said he planned to resign as chairman of UMC in March, after the company was fined by the Taiwan Stock Exchange for belatedly issuing a Chinese-language statement to notify Taiwanese investors the company had been required to restate earnings from 2002 to 2004 under U.S. accounting rules. The change did not affect the company’s earnings issued under Taiwanese accounting rules. UMC’s stock is listed in both Taiwan and the United States.

In a statement, UMC said Monday’s indictment of Tsao and Hsuan over the alleged illegal investments in He Jian did not reflect the honesty and integrity of both men. “UMC believes that the indictment of Bob Tsao and John Hsuan is of a purely political nature and caused by the special nature of the relationship between Taiwan and Mainland China,” it said.

UMC’s operations will not be affected by the indictments, the company said.

In June, UMC placed front-page statements in two Taiwanese newspapers calling on government investigators to speed up their investigation of UMC and Tsao, saying he would step down if found guilty. In Taiwan, the chairman is responsible for any company wrongdoing.

Earlier, UMC was fined $93,800 in April by investigators for providing assistance to He Jian.