SinoPac Bank sues Morgan Stanley over sale of subsidiary

Taipei-Taiwan-based SinoPac Bank has filed a lawsuit against Morgan Stanley for failure to fulfill its duty in the sale of the bank's assets in the United States.

In the lawsuit filed with the Taipei District Court, SinoPac Bank said it is seeking NT$2.15 billion (US$69.32 million) in compensation because Morgan Stanley did not exercise due care as a financial advisor in the sale of a SinoPac subsidiary in 2016.

The subsidiary, Far East National Bank (FENB), was sold to Cathay General Bancorp for US$353 million, a price below market value, according to a statement filed with the Taiwan Stock Exchange (TWSE) on Monday by SinoPac Financial Holdings Co, which owns SinoPac Bank.

SinoPac Bank has also sued its former president Michael Chang (???), accusing him of concealing US$69.28 million of FENB assets, which it said had led to undervaluing of the subsidiary in the sale, according to the statement.

SinoPac Bank accused Chang of breach of trust and violation of the Financial Holding Company Act and the Banking Act.

After the sale was completed in 2016, Taiwan's Financial Supervisory Commission (FSC) received public complaints about the undervaluing of FENB in the transaction, and the bank decided to launch an investigation into the deal, SinoPac Financial said.

On Monday, SinoPac Bank spokesman Hsiao Lung-chi (???) told the press that during the three-year probe, the bank went through e-mails it had obtained from Morgan Stanley about the transaction and found that Chang had concealed some of FENB's assets.

Hsiao said Morgan Stanley was entrusted to serve as a financial advisor to SinoPac Bank but failed in its duties, which caused the bank to suffer losses and undermined the interests of its shareholders.

Liao Shun-hsin (???), chief financial officer of SinoPac Financial, said his company will not rule out of the possibility of seeking damages from Chang.

Chang, however, said Monday that the lawsuit was a retaliatory action against him because he had blown the whistle on irregularities in a series of loans extended by SinoPac Bank in 2016, which led to the removal of then SinoPac Financial Chairman Ho Shou-chuan (???) from his post in 2017.

The accusation that he had concealed some of FENB's assets was completed unfounded, Chang said.

At the time, all of FENB's financial results were fully disclosed and were then reviewed by the board of directors of SinoPac Financial and SinoPac Bank, he said.

When the sale of FENB was announced, SinoPac Financial's share price spiked, while its credit ratings also rose, Chang said.

In response, SinoPac Bank said the lawsuit was in no way retaliatory since Chang had not yet made the claims about loan irregularities when the FSC received the complaints about the undervaluing of FENB and the bank launched the probe.

According to an FSC official, SinoPac Financial has to provide sufficient grounds on which to sue Chang, and the commission will respect the results of the investigations launched by judicial authorities.

On Tuesday, shares of SinoPac Financial rose 0.41 percent to close at NT$32.30 (US$1.04), outperforming the local main board, where the weighted index ended down 0.01 percent at 10,918.01 points.

Source: Focus Taiwan News Channel