Taiwan prosecutors raid Inventec, question 12 executives

Prosecutors and hundreds of investigators raided the headquarters of mobile phone maker Inventec Appliances Corp. and the residences of related management members yesterday afternoon, taking 12 executives back to their office for interrogation over their alleged insider trading of the firm's shares, according to Panchiao District Prosecutor's Office.

Among the executives questioned were Chen Lieh-hong, the firm's vice president and spokesman; Ho Tai-shui, vice president and chief of the firm's Shanghai plant; and Lai Chen-hsing, vice president and chief of the firm's Nanjing plant.The whereabouts of the firm's Chairman Chang Ching-sung remain unknown.

Prosecutors and investigators confiscated several accounting books of the firm and will determine whether to indict or seek detention of relevant executives in accordance with the evidence they procure.

The raid came as part of prosecutors' probe over abnormal sales of the firm's stocks by its top executives in early 2006, before the firm's massive layoff plan was carried out, with the sales leading to illegal gains of over NT$1 billion.

Inventec Appliances was officially listed on the Taiwan Stock Exchange on October 25, 2005 at a unit price of NT$108. The company then performed fairly well in the contract production of Apple's iPod computer products, selling own brand (OKWAP) handsets in Taiwan, and sales of its PHS products in mainland China. As a result, the firm's listed share price rallied all the way to a high of NT$235.

In January 2006, Inventec Appliances publicly claimed its normal business operations, but 16 executives of the firm moved to unload 2,638,000 shares in the following two months.

Afterwards, the firm's revenue records dropped sharply, causing the firm's share prices to plunge.

Unfavorable news subsequently emerged, including Apple reducing its contract production orders for iPod computers, a massive layoff plan being carried out, and a company personnel reshuffle being undertaken, forcing stock market analysts to downgrade their investment rating on Inventec Appliance shares.

Nevertheless, the company announced in late February of 2006 that it would join the capital increment program of the firm's subsidiary in China, contributing NT$800 million to the program to finance construction of a new plant in Pudong, Shanghai. The peculiar business strategy also drew attention from prosecutors and investigators.