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Co-Chair of U.S. House of Representatives Taiwan Caucus Urges SEC to Delay Determination on Chunghwa
Washington, D.C. – Rep. Sherrod Brown, (D-Ohio), co-chair of the Taiwan Caucus of the U.S. House of Representatives, has asked the Securities and Exchange Commission to withhold its determination on the effectiveness of the registration statement filed by Chunghwa Telecom Co. Ltd., until the pending legal and constitutional challenges to the proposed sale are resolved.
In a letter to the SEC's Acting Chair, Brown noted that the secondary public offering of Chunghwa stock "has generated considerable controversy in Taiwan and has precipitated a legal crisis."
Brown summarized the current and pending actions of the Legislative Yuan and three dissenting directors of the Chunghwa Telecom board in opposition to the sale. He expressed concern that premature action in the United States "may be undermining the democratic process in Taiwan and denying the sovereign status of their constitutional and legal systems."
Brown called on the SEC to "delay the offering until the constitutional issues relevant to Taiwanese democracy are resolved." Brown's letter is attached.
Background on the Proposed Secondary Offering
On Aug. 3, three members of the board of directors of Chunghwa Telecom Co. Ltd. and the Chunghwa Telecom Workers Union in Taiwan filed for a temporary restraining order from the Taipei High-Administrative Court to block a secondary public offering of Chunghwa shares.
In a separate action, the three directors filed a formal objection to the sale and alerted the SEC on July 24 that the offer does not comply with Taiwanese law.
Leaders of the Chunghwa Telecom Workers Union, along with the Communications Workers of America and the AFL-CIO, which are supporting their efforts, continue to maintain that Chunghwa Telecom lacks the authority to engage in this offering.
Further, the company's disclosure regarding the dispute over this authority, as required by the Securities and Exchange Commission, is inadequate and does not give prospective investors sufficient information to reach an informed decision about the legal risks involved in purchasing the securities Chunghwa proposes to sell in the United States, the parties contend.
A binding resolution blocking the sale was passed by the Legislative Yuan, Taiwan's sole legislative body, on June 21, 2005. Later, 100 members of the Legislative Yuan called on the Taiwan Judiciary to enforce that law, triggering a constitutional challenge to the actions of Chunghwa Telecom and the Ministry of Transportation and Communications, which controls the share proposed for sale.
Contrary to claims by the sale's proponents, the Grand Justice did not address the merits of the challenge but indicated that further action should be taken by the Legislative Yuan.
Clearly, the serious concerns raised by the 100 legislators, three members of the Chunghwa Telecom board of directors and Chunghwa Telecom Workers Union remain in force.
This issue of authority is critical to U.S. investors, who may consider buying shares of Chunghwa Telecom through offerings made by investment banks Goldman Sachs, International, UBS and Morgan Stanley. Given the uncertain legal outcome in Taiwan, these shares may never be available for U.S. investors, and the SEC should act to protect U.S. investors and the capital market from a possibly illegal transaction.
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In a letter to the SEC's Acting Chair, Brown noted that the secondary public offering of Chunghwa stock "has generated considerable controversy in Taiwan and has precipitated a legal crisis."
Brown summarized the current and pending actions of the Legislative Yuan and three dissenting directors of the Chunghwa Telecom board in opposition to the sale. He expressed concern that premature action in the United States "may be undermining the democratic process in Taiwan and denying the sovereign status of their constitutional and legal systems."
Brown called on the SEC to "delay the offering until the constitutional issues relevant to Taiwanese democracy are resolved." Brown's letter is attached.
Background on the Proposed Secondary Offering
On Aug. 3, three members of the board of directors of Chunghwa Telecom Co. Ltd. and the Chunghwa Telecom Workers Union in Taiwan filed for a temporary restraining order from the Taipei High-Administrative Court to block a secondary public offering of Chunghwa shares.
In a separate action, the three directors filed a formal objection to the sale and alerted the SEC on July 24 that the offer does not comply with Taiwanese law.
Leaders of the Chunghwa Telecom Workers Union, along with the Communications Workers of America and the AFL-CIO, which are supporting their efforts, continue to maintain that Chunghwa Telecom lacks the authority to engage in this offering.
Further, the company's disclosure regarding the dispute over this authority, as required by the Securities and Exchange Commission, is inadequate and does not give prospective investors sufficient information to reach an informed decision about the legal risks involved in purchasing the securities Chunghwa proposes to sell in the United States, the parties contend.
A binding resolution blocking the sale was passed by the Legislative Yuan, Taiwan's sole legislative body, on June 21, 2005. Later, 100 members of the Legislative Yuan called on the Taiwan Judiciary to enforce that law, triggering a constitutional challenge to the actions of Chunghwa Telecom and the Ministry of Transportation and Communications, which controls the share proposed for sale.
Contrary to claims by the sale's proponents, the Grand Justice did not address the merits of the challenge but indicated that further action should be taken by the Legislative Yuan.
Clearly, the serious concerns raised by the 100 legislators, three members of the Chunghwa Telecom board of directors and Chunghwa Telecom Workers Union remain in force.
This issue of authority is critical to U.S. investors, who may consider buying shares of Chunghwa Telecom through offerings made by investment banks Goldman Sachs, International, UBS and Morgan Stanley. Given the uncertain legal outcome in Taiwan, these shares may never be available for U.S. investors, and the SEC should act to protect U.S. investors and the capital market from a possibly illegal transaction.
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