Carlyle Appointees Face Taiwan Probe Over Alleged Deal Leaks

Updated on
  • Complaint alleges leak of company secrets to potential buyer
  • Lawyer for one director dismisses action as ‘frivolous’

Taiwan prosecutors are investigating a criminal complaint against directors appointed by Carlyle Group LP to the board of one of the island’s biggest broadcasters over an alleged breach of their duties during efforts to offload the private equity firm’s stake.

The three Eastern Broadcasting Co. directors -- Gregory Zeluck, a Hong Kong-based managing director with Carlyle, former Carlyle managing director Alex Ying and EBC’s Carlyle-appointed Chairman Joseph Fan -- were accused of passing confidential company information to a potential investor in 2016 without the board’s knowledge, according to a complaint filed on behalf of EBC with the Taipei District Prosecutors Office and obtained by Bloomberg.

Prosecutors are examining the evidence and no one has been charged, Taipei District Prosecutors Office spokesman Chang Chieh-chin said by phone. Zeluck and Fan reported for questioning in Taipei on July 11, local media including the China Times reported.

“We think this is a frivolous action,” Daniel Song, a Taipei-based lawyer for Zeluck, said by phone. “When Carlyle invested in EBC, the major shareholders in the companies signed a shareholders’ agreement which allows every shareholder to disclose corporate information to potential buyers when the shareholder intends to sell their shares,” Song added.

Fan, in an email, also said the disclosures were allowed by a shareholders’ agreement, which he said was approved by EBC “before I came on board.” Ying declined to comment when reached on his mobile phone, as did Brian Zhou, a Carlyle spokesman. Divulging trade secrets and breach of trust are criminal offenses in Taiwan, with a maximum penalty of up to five years in jail.

Stymied Deals

The inquiry marks the latest twist in saga that began when the Washington-based private equity firm entered Taiwan’s lucrative cable-TV industry more than a decade ago. While the firm successfully exited Eastern Broadcasting’s affiliate, cable operator Kbro Co., in a 2010 deal worth $1.2 billion, attempts to sell EBC have met with regulatory challenges. A plan to sell EBC for $370 million to U.S. film producer Dan Mintz, chief executive officer of California-based DMG Entertainment, was stymied by Taiwan’s strict media-ownership rules, as was last year’s deal with Taiwan Optical Platform Co. for $351 million.

The complaint to Taiwan prosecutors was filed by Winston Hsieh, a non-voting member of EBC’s board.

“I can understand they wanted to sell their stake but they must do it in compliance with the laws,” Hsieh said by phone. “Responsible officers have an obligation to protect company secrets from potential competitors and other outsiders. This is not a publicly listed company and this information is very privileged.”

(Updates with comment from Joseph Fan in fifth paragraph.)
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