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Chunghwa Telecom Directors Alert SEC to Illegal Share Offering; AFL-CIO Calls on SEC to Block Sale
Washington, D.C. --Three members of the board of directors of Chunghwa Telecom Co., Ltd., (NYSE: CHT) have alerted the U.S. Securities and Exchange Commission that a proposed sale of the company's stock in the United States is illegal under Taiwanese law. This is a formal objection by the directors that limits their liability against shareholder actions under Taiwanese law.
Chunghwa Telecom is the government-owned telecommunications company and the Taiwan Ministry of Transportation and Communications, the company's controlling shareholder, is attempting to sell shares despite binding restrictions placed on it by Taiwan's legislature, which have been signed by the President of Taiwan.
The three directors said, in a letter to the SEC, that "it is our responsibility and right to inform you (of) the illegality and existing legal challenge" to the U.S. offering of Chunghwa Telecom shares.
The directors – Shih-Peng Tsai, Yauh-Hong Lin and Yen-Chung Lin – have refused to sign the registration statement and have made a formal dissent from the offering because it does not comply with Taiwanese law.
A binding resolution blocking the sale passed by the Legislative Yuan, Taiwan's sole legislative body, was signed by Taiwan's president on June 21, 2005. In a separate action, 100 members of the Legislative Yuan have triggered a constitutional challenge to the sale, calling on the Judiciary Yuan to enforce the resolution and block the stock sale. That review will take several months to complete, the directors said.
"Until the Taiwanese judiciary resolves this dispute, the right of the Ministry of Transportation and Communications to resell the shares cannot be established clearly. Neither the Ministry of Transportation and Communications nor the underwriters can provide a warranty of title to any purchaser of the shares" as required under U.S. securities law, they wrote.
In addition, "10 members of the Legislative Yuan and 149 shareholders of Chunghwa Telecom have sued the Minister of Transportation and Communications," the directors noted.
The Communications Workers of America and the AFL-CIO are working with the Chunghwa Telecom Workers Union to alert U.S. and state regulators to the serious problems surrounding this offering.
"The SEC should not be deciding questions that are the jurisdiction of Taiwan. The United States must respect democracy in Taiwan," said CWA Executive Vice President Larry Cohen. "Taiwan must determine the legality and constitutionality of this issue before any further action is taken by financial interests in the United States." Cohen heads the 2.5 million member telecom sector of Union Network International.
In a separate letter today to the SEC, the AFL-CIO asked that the agency halt the proposed sale of Chunghwa Telecom shares, stressing that the sale "may be invalid due to restrictions placed on the ability of the Ministry of Transportation and Communications to resell the shares."
The AFL-CIO pointed out that the registration statement filed by Chunghwa Telecom with the SEC "does not enable investors to decide whether or not the Ministry of Transportation and Communications and the underwriters can sell the shares free of any restrictions imposed by Taiwanese law."
The AFL-CIO letter also stressed that if the SEC allowed the offering to go forward, it was, in effect, deciding "an issue that is for the Taiwanese judiciary alone to decide."
Last week, a delegation from the Chunghwa Telecom Workers Union and a member of the Taiwan legislature met with the New York State Attorney General's office and investment firms involved in the offering and spoke with members of Congress to outline their concerns.
Investment banks Goldman Sachs International, Morgan Stanley and UBS are underwriting the stock sale. A registration statement for the proposed sale was filed with the SEC on July 6, however, the three directors objected to the filing and refused to sign the statement.
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Contact dwaizene@aflcio.org or cjohnson@cwa-union.org for copies of the letters to the SEC from the directors and the AFL-CIO, and the statement of Legislator Tsai.
Chunghwa Telecom is the government-owned telecommunications company and the Taiwan Ministry of Transportation and Communications, the company's controlling shareholder, is attempting to sell shares despite binding restrictions placed on it by Taiwan's legislature, which have been signed by the President of Taiwan.
The three directors said, in a letter to the SEC, that "it is our responsibility and right to inform you (of) the illegality and existing legal challenge" to the U.S. offering of Chunghwa Telecom shares.
The directors – Shih-Peng Tsai, Yauh-Hong Lin and Yen-Chung Lin – have refused to sign the registration statement and have made a formal dissent from the offering because it does not comply with Taiwanese law.
A binding resolution blocking the sale passed by the Legislative Yuan, Taiwan's sole legislative body, was signed by Taiwan's president on June 21, 2005. In a separate action, 100 members of the Legislative Yuan have triggered a constitutional challenge to the sale, calling on the Judiciary Yuan to enforce the resolution and block the stock sale. That review will take several months to complete, the directors said.
"Until the Taiwanese judiciary resolves this dispute, the right of the Ministry of Transportation and Communications to resell the shares cannot be established clearly. Neither the Ministry of Transportation and Communications nor the underwriters can provide a warranty of title to any purchaser of the shares" as required under U.S. securities law, they wrote.
In addition, "10 members of the Legislative Yuan and 149 shareholders of Chunghwa Telecom have sued the Minister of Transportation and Communications," the directors noted.
The Communications Workers of America and the AFL-CIO are working with the Chunghwa Telecom Workers Union to alert U.S. and state regulators to the serious problems surrounding this offering.
"The SEC should not be deciding questions that are the jurisdiction of Taiwan. The United States must respect democracy in Taiwan," said CWA Executive Vice President Larry Cohen. "Taiwan must determine the legality and constitutionality of this issue before any further action is taken by financial interests in the United States." Cohen heads the 2.5 million member telecom sector of Union Network International.
In a separate letter today to the SEC, the AFL-CIO asked that the agency halt the proposed sale of Chunghwa Telecom shares, stressing that the sale "may be invalid due to restrictions placed on the ability of the Ministry of Transportation and Communications to resell the shares."
The AFL-CIO pointed out that the registration statement filed by Chunghwa Telecom with the SEC "does not enable investors to decide whether or not the Ministry of Transportation and Communications and the underwriters can sell the shares free of any restrictions imposed by Taiwanese law."
The AFL-CIO letter also stressed that if the SEC allowed the offering to go forward, it was, in effect, deciding "an issue that is for the Taiwanese judiciary alone to decide."
Last week, a delegation from the Chunghwa Telecom Workers Union and a member of the Taiwan legislature met with the New York State Attorney General's office and investment firms involved in the offering and spoke with members of Congress to outline their concerns.
Investment banks Goldman Sachs International, Morgan Stanley and UBS are underwriting the stock sale. A registration statement for the proposed sale was filed with the SEC on July 6, however, the three directors objected to the filing and refused to sign the statement.
###
Contact dwaizene@aflcio.org or cjohnson@cwa-union.org for copies of the letters to the SEC from the directors and the AFL-CIO, and the statement of Legislator Tsai.