CTBC Brothers Board Member Owes US$10M in Taxes
On December 1, multiple media outlets reported that one of the CTBC Brothers’ board members 林逢春 (Lin Feng-Chun) is currently under investigation by Taiwan’s Investigation Bureau for invoice fraud and tax evasion.
According to the UDN, Lin Feng-Chun used his other company Media Drive to issue false invoices between 2009 and 2017. The 51-year-old chairman of Media Drive allegedly owes toughly 10 million USD in unpaid taxes.
Media Drive was established in 1998. Over the years, it became one of the largest marketing and media agencies in Taiwan. Apart from many well established international brands as their clients, Media Drive also works closely with the CTBC Brothers and Wei Chuan Dragons’ parent company.
Related But Not Really Related to CTBC Brothers
Although Lin Feng-Chun is on the board of the CTBC Brothers, but in a way, he is not really “connected” to the CTBC Brothers. So, how does that work?
At the end of the 2013 season, CTBC Financial purchased the Brother Elephants using an “independent shell company” owned by Lin Feng-Chun called Hua-Yi Recreational. And CTBC Financial would “provide” the funding to Hua-Yi Recreational and then pass it on to the CTBC Brothers.
In some ways, Hua-Yi Recreational is basically a glorified middle man with no actual power. The real decision-maker for the CTBC Brothers baseball team is actually CTBC Financial.
This is why even though Lin Feng-Chun is the owner of Hua-Yi Recreational and is on the board of the CTBC Brothers, this tax evasion incident really has nothing to do with the CTBC Brothers baseball team.
Why Use an Independent Company Like Hua-Yi?
The reason to use an independent company with zero tie-ins with CTBC Financial is to bypass Taiwans’ Financial Holding Company Act article 36 and the Banking Act article 74.
Technically speaking, the financial entities in Taiwan are not allowed to invest outside the financial sector.
But if a financial entity wish to invest outside of the financial sector, based on the Financial Holding Company Act, it must set up another company. There will also be a 1.6 million USD investment limit.
The Banking Act is more straightforward. It stated that should a financial entity wish to invest outside the financial sector, it must not exceed a 5% stake in that company.
Sounds pretty strict, right? But just like everything in life, there are always ways to get around the problems. And that is what CTBC Financial did back in 2013 to bypass the Financial Regulations.
Notes: I am not really an expert in financial laws and regulations. All the information above were just from my limited understanding of this matter.