The former chairman of defunct Far Eastern Air Transport (Taipei Sung Shan) was sentenced to 14 years imprisonment by the Taipei District Court on September 30, 2024. The court found Zhang Gangwei guilty of offences against the country's Securities and Exchange Act, including falsifying financial documents and embezzlement.
Far Eastern ceased operations in late 2019, citing difficulties raising funds due to long-term operating losses. It was at that point operating six ATR72-600s, four MD-82s, and three MD-83s primarily to Penghu and Kinmen from Taipei Sung Shan, Kaohsiung, and Taichung Ching Chuan Kang. Within months, Taiwanese authorities had Zhang on their radar, detaining him for questioning on fraud-related offences. He remained in custody for around 12 months until receiving bail.
Zhang was among ten people formally indicted on July 31, 2021, in the matter. The Taipei District Prosecutor's Office alleged he used the airline to financially support his non-aviation-related business interests. Far Eastern has struggled financially since the early 2000s. Prosecutors said this was partly due to the behaviour of Zhang and other senior managers.
In 2008, Far Eastern successfully applied to the courts for a supervised restructuring process akin to US Chapter 11 procedures. Prosecutors said Zhang took over the airline after producing financial statements suggesting his business conglomerate, Huafu Enterprise Holdings Ltd, was sufficiently liquid to support Far Eastern. It was not, and the financial statements were falsified.
Covering this week's court outcome, the Focus Taiwan outlet reports that in 2015, Zhang secured a TWD1.3 billion Taiwanese dollar (USD40.9 million) loan for Far Eastern at 6.5% per annum but then transferred those funds to Huafu and left Far Eastern to repay the loan. In 2016, Zhang secured another TWD2.2 billion (USD69.2 million) loan for Far Eastern, which he instead used to pay off loans taken out by Huafu entities. Prosecutors say he also misappropriated another TWD800 million (USD25.2 million) from Far Eastern. When Taiwan's Civil Aviation Administration (CAA) came calling to undertake an audit, he allegedly forged five documents concerning the transfers, saying they were loans from Far Eastern to Huafu.
That audit sparked concerns inside the CAA that Far Eastern's financial position was poor, and they told the airline to call in the loans to shore up its cash position. Instead of doing that, Zhang bundled up a Huafu property development project and used that to offset Far Eastern's account receivables.
In addition to the 14-year sentence, the judge added another 12 months which can be offset if Zhang pays a fine. The judge also ordered the former chairman repay TWD3 billion (USD94.6 million) he collected as a result of his activities.
