The family of Hetong Chemical founder Chen Wuxiong is involved in the Nangang land case and is suspected of breach of trust of more than 2.1 billion yuan

The family of Chen Wuxiong, founder of the listed company Hetong Chemical, known as the "Godfather of the petrochemical industry," was involved in the Nangang land case. The land involved was bid for more than 2.6 billion yuan in the early years and was resold for more than 28.2 billion yuan in 2020. The Taipei District Prosecutor's Office found that Chen Wuxiong and others were suspected of using substantial control over the status of Hetong and its subsidiary Hexincheng, causing the company to suffer a total loss of more than 2.1 billion yuan. They were also involved in concealing nearly 700 million yuan in related party transactions. Eight people were prosecuted under the Securities and Exchange Act for special breach of trust and other crimes.

When the land in Danangang was put up for public auction in 2020, Fubon Life won the bid with a price of 28.287 billion yuan, second only to the 37.2 billion yuan bid price of the land in Jinghua City, which became the second highest price for domestically owned land at the time. As the value of the land rose sharply, He Xincheng's sale of holdings and subsequent value-added interests that year also became the focus of prosecutors' investigation.

The lawsuit points out that 85-year-old Chen Wuxiong is the founder and chairman of Hetong Chemical. After resigning, he still effectively controls the personnel, finance and business of Hetong and its 100%-owned subsidiary Hexincheng; his wife Lin Jinhua, son Chen Weiyu, daughter Chen Yiru, as well as Yang Xinjie, Liu Jiancheng, Cai Yitong, Lin Huiyan and others serve as directors, managers or financial supervisors of Hetong and Hexincheng respectively.

According to prosecutors' investigation, the Taiwan Agricultural and Industrial Corporation publicly auctioned land in the Yucheng section of Nangang District, Taipei City at the end of 2003. Chen Wuxiong and other co-developers won the bid for 2.691 billion yuan, and then planned and developed it. In 2006, He Xincheng signed a joint investment and development agreement with other companies and purchased 7,470.65 square meters of land from the co-developer for a total price of 6.6 billion yuan.

As the land development in Nangang gradually became clear, Chen Wuxiong first asked his wife to set up a Peony Company abroad, and then established Yusheng Company in the name of his daughter-in-law Lu Yingqi and his relative Liao Bichun. Yu Sheng signed a letter of intent for land purchase and sale with He Xincheng in 2008, and later purchased 3,164.04 square meters of the Nangang land held by He Xincheng for a total price of NT$698.7 million, accounting for approximately 42.35% of the land.

However, Yusheng is actually 100% owned and controlled by Peony Company, which is invested by members of Chen Wuxiong’s family, and has substantial related party relationships with Hetong and Hexincheng. Yusheng was supposed to pay the balance of NT$346.96 million when the Nangang Land Joint Loan was approved. However, after the joint loan was fully approved at the end of 2015, due to Chen Wuxiong's lack of personal funds, he only paid NT$127.5 million the following year, leaving approximately NT$129.95 million outstanding. It was not until the land was sold to Fubon Life that Yusheng paid off the amount owed.

The prosecutor in charge, Gao Wenzheng, calculated the subsequent sale value of the land and determined that Chen Wuxiong and others failed to take back the land after Yusheng breached the contract. He Xincheng and its parent company Hetong missed out on value-added benefits. This part alone resulted in a loss of 1.816 billion yuan. In addition, due to changes in the urban plan, He Xincheng originally enjoyed a certain proportion of "substitute land" rights, but Chen Wuxiong and others were suspected of arranging the transfer or abandonment. The two parts together caused Hexincheng and Hetong to suffer losses of more than 2.1 billion yuan.

The prosecution pointed out that Chen Wuxiong and others knew that He Xincheng, He Tong and Yusheng had a substantial relationship, but still failed to disclose the land transaction of 698.74 million yuan in the consolidated financial report from 2008 to 2020, which was enough to affect the judgment of investors and the inspection of the competent authorities. After the investigation, they were prosecuted under the Securities and Exchange Act for crimes such as special breach of trust and false financial reports.