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John Liu
Wednesday, Sep 24, 2014

Asia

Leading Taiwan fashion company president suspected of fraud

The China Post/ANN | John Liu | Wednesday, Sep 24, 2014

TAIPEI, Taiwan - Prosecutors yesterday summoned Zheng Jing-tai (鄭景太), the president of Tokyo Fashion Co. (東京著衣) and conducted searches of his residence on suspicion of fraud and hollowing out the company's assets.

Prosecutors also summoned Zhou Pin-jun (周品均), Tokyo Fashion's founder and CEO, to testify in court yesterday.

Completing one transaction every five seconds, Tokyo Fashion is Taiwan's most successful online clothing store for women. Running an effective business model, the company received investment from Japanese companies and a Singapore sovereign wealth fund.

However, Tokyo Fashion's image suffered last year as the company founders Zheng and Zhou's family feud went public before their corporate divorce last October.

Zheng was found to be stealing the company's assets starting in November last year, reportedly because he wanted to grab a bigger share of company assets after the divorce. Zhou claimed that it wasn't until yesterday that she was notified of Zheng's fraud.

The Bureau of Investigation yesterday dispatched over 40 officers to conduct searches in Tokyo Fashion's headquarters, Zheng's residence, an accounting firm and other locations.

Zheng allegedly conspired with a man surnamed Li to hollow out Tokyo Fashion's assets. According to prosecutors, Li set up a dozen companies that then conducted fake transactions with Tokyo Fashion. Those with their names listed as in charge of those companies were also summoned for inquires yesterday, and so was Tokyo Fashion's Chief Operations Officer Guo Yi-lin (郭奕麟).

Fake Invoices to Remit Money

According to prosecutors, starting in November last year, seven companies set by Li issued more than 100 invoices to Tokyo Fashion without conducting any trades in actuality. The total invoiced amounts reached north of NT$100 million ($4 million).

Zheng then instructed company employees to remit money to the companies set up by Li, under the pretense of making purchases. Zheng later used the seals and bank books of Li's companies to withdraw the deposit in cash. Out of the remitted NT$100 million, Li was compensated NT$20 million while Zheng kept the rest, according to investigators.

Prosecutors have frozen tens of millions of dollars in Zheng's bank account suspected to be obtained through illegal embezzlement. In addition, prosecutors are tracing the whereabouts of more embezzled money.

The Bureau of Investigation stressed that the government wants to instill business ethics and integrity in local enterprises, large or small. If found guilty, chief executive officers, general managers and high-ranking officers may all be prosecuted. In the case of Tokyo Fashion, prosecutors are investigating for possible violations of the Business Entity Accounting Act.

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