In early September, the Executive Yuan completed the review of its drafts of the proposed Political Party Law and the Statute on Disposition of Assets Improperly Obtained by Political Parties, which are intended to provide the primary legal basis for regulating political parties' operations.

Among other things, the draft Political Party Law stipulates that in the future all political parties will be prohibited from operating or investing in profit-making enterprises or non-print mass media, and they must periodically report their financial holdings. The law further specifies that parties' existing commercial assets must either be sold off or placed in a blind trust within two years of the law's promulgation. These principles have broad support, particularly in view of the extreme rarity in advanced democracies of political party involvement in business and the mass media.

Because the Statute on Disposition of Assets will impact mainly on Kuomintang (KMT) party interests, and because the bill comes before the legislature in the run-up to the year-end Taipei and Kaohsiung mayoral and city council elections, it has prompted accusations that it is being used as a stratagem for dismembering the KMT. With regard to verification of impropriety of party assets, the statute features a "presumption of impropriety." In other words, save for party dues, election campaign donations, disbursement of such donated funds to individual candidates, and bank interest earnings from the above three types of funds, all other assets are to be considered ill-gotten. If parties wish to retain pre-existing assets that do not fit these allowed categories, they must prove their legitimacy. If assets acquired before the statute's promulgation are determined not have been legitimately obtained, their ownership must be transferred to the state or to local government bodies.

It remains to be seen whether the two bills can be passed during the new session of the Legislative Yuan, convened in September, and whether they will deal a lethal blow to the KMT, with its vast assets.

In response to the gathering impetus for a government audit of its assets, the KMT convened an emergency meeting of party leaders at its headquarters on September 11.

The meeting reached three main consensuses: to return various donations to donors, and dispose of more than 100 parcels of land on the party's books, which, although legitimately owned, ought to be donated for public-interest uses in order to uphold a "high moral standard"; to appeal to all party members to bid farewell to the unsavory practices of the bygone era, and to recommend that the KMT Central Standing Committee establish an investigative task force to comprehensively examine party assets, including transaction records of sales of land and shareholdings; and to call on the ruling Democratic Progressive Party to give a full public account of its own assets, its foundations, and President Chen Shui-bian's Formosa Foundation.

Just as a number of KMT legislators chimed in with calls for party headquarters to undertake an accounting of party assets, media reports revealed that many KMT enterprises reputed to be big moneyspinners are in fact now drowning in red ink.

As indicated in these reports, in the past, KMT-run enterprises "cooked the books" to conceal financial troubles, consistently acknowledging only superficial profits and ignoring underlying losses. In an attempt to give a more realistic account of actual financial conditions of party-run enterprises, late last year the KMT produced a detailed listing of previously obscured losses, adding up to a vast sum.

According to financial statements of KMT-owned Central Investment Holding Company and Huahsia Investment Holding Company, over the past several years, they have invested in just about everything under the sun, from pagoda mausoleum sales, golf courses, chemicals, textiles, foods, tourism, entertainment and leisure businesses, and cultural and media enterprises, to high-tech electronics and communications firms-and have even invested in hotels in Pulau and mutual funds in Indonesia, in support of national foreign policy. These investments, however, have now resulted in losses which, according to the two companies' 2001 year-end statements, amounted to as much as NT$38.3 billion.

As a matter of fact, after assuming the KMT chairmanship in March 2000, Lien Chan stated that after a comprehensive examination of party assets and commercial investments, it had been discovered that during Lee Teng-hui's presidency, when Liu Tai-ying was director-general of the KMT's Investment and Business Management Committee, there were eight highly controversial investment cases with combined total losses of NT$9.8 billion. The investments referred to by Lien probably included a number of companies known to have sustained losses in connection with business scandals prominently reported in the media in the period before and after the 1997 Asian financial crisis, including: the Tun Lung Metal Company asset-stripping case, the Goldsun Development and Construction Group default case, the Taiwan Pineapple Corporation stock fraud case, the Top Group and Hung Fu construction scandals and the Taiwan Fertilizer Corporation stock market manipulation scandal. The KMT is known to have had financial interests in all these companies.

From media revelations of the state of KMT business accounts and the details of its investment portfolio, outsiders have begun to piece together a complex web of political-commercial connections. Just recently, that jigsaw puzzle has been further complicated by the eruption of a new KMT investment-related scandal. Unexpectedly, the lead character in this new drama is Su Hui-chen, a major shareholder of Zanadau Development Corporation who has intimate connections with the ruling DPP. Competing media reports and heated call-in show discussions have added new kinks to the tangle of political-commercial interests, with a bearing on the auditing of KMT assets as well as on the operation of constitutional governance.

On September 13, Su (who hails from Hunei Township in Kaohsiung County, and once served as a Kaohsiung County councilor) brought forward evidence alleging that, beginning in 1998, China Development Corporation chairman Liu Tai-ying, through associates Lee Ming-che and Li Tai-chi, bilked her of more than NT$1 billion in brokerage fees in return for a pledge to help secure a syndicated bank loan for Zanadau; and that when the loan failed to materialize, Liu Tai-ying refused to return the funds, leaving her strapped with a huge financial debt.

Included in the evidence presented by Su were bank receipts of electronic fund transfers to Lee Ming-che and Lee Tai-chi; a promissory fund-raising agreement signed by Lee Ming-che in connection with Zanadau's projected Tahu Commercial Zone development project; and a top-secret memo written by Zanadau chairman Chung Hu-pin (previously boss at KMT-owned Central Motion Picture Corporation) to Liu Tai-ying, at the time director-general of the KMT's Investment and Business Management Committee, who had deputed Chung to take over the Zanadau chairmanship. Su also revealed that years earlier, in order to prod the legislature into speedy approval of privatization of state-owned Taiwan Fertilizer Corporation (in the expectation that Taifertilizer would then invest heavily in Zanadau), Lee Ming-che had extracted from her a large sum of money for the purpose of bribing key legislators, to the tune of NT$5 million apiece.

The clouds of suspicion generated by the Zanadau case continue to grow thicker as fallout from Su Huei-chen's bombshell exposure has blasted in all directions. Included in the grab bag of businesspeople and politicians implicated in mass payoffs are members of both KMT-aligned "blue" and DPP-aligned "green" forces. Even Yu Chen Yueh-ying, a senior advisor to the president, has been accused of abusing her power as former Zanadau chairwoman to sell land in her name to the company at two to three times the fair market price. The question of whether the Zanadau scandal will ultimately serve to bring to light the vast iceberg of collusion between business interests and politicians-or whether, as with the Yin Ching-feng military procurement scandal, the iceberg will go on concealing its secrets in consideration of its extreme complexity and sensitivity to sunshine-represents one gauge of how democracy in Taiwan is faring, a matter of concern to many an observer.

On September 17, Premier Yu Shyi-kun directed economic affairs minister Lin Yi-fu to set up an eight-person task force (including justice minister Chen Ding-nan, Central Personnel Administration director-general Lee Yi-yang, and Directorate General of Budget, Accounting and Statistics head Lin Chuan) with a mandate to find out if any governmental officials had engaged in wrongdoing in connection with Taifertilizer's investment in Zanadau, and if so, to refer such matters to court investigators. It is the public's hope that all investigative bodies will neither fear repercussions nor allow themselves to be intimidated by power, but forthrightly refer instances of illegality to the courts and cases of "inappropriate behavior" to the Control Yuan.

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With the publication of the Political Party Law and the Statute on Disposition of Assets Improperly Obtained by Political Parties, the issue of KMT party assets has been aired once again, and the party's national headquarters building has become a focus of controversy. (photo by Hsueh Chi-kuang)