Interest Now Shifts to Assets of Losing Party

TAIPEI, Taiwan — Suddenly, one of the world’s biggest political war chests, a collection of assets worth billions of dollars, is about to come under scrutiny and may be up for grabs.

Less than a day after the historic electoral defeat of the Kuomintang, or KMT, Taiwan’s ruling party, opponents began talking Sunday about joining forces to examine and gain access to the KMT’s long-secret business operations and investments.

“We are going to introduce legislation to do an accounting to find out if the KMT’s wealth came from the people’s money,” said Daniel Huang, a Taiwanese legislator allied with independent presidential candidate James Soong, who finished second in Saturday’s election.

Huang raised the prospect that Soong’s allies might team up on such legislation with the Democratic Progressive Party, or DPP, headed by President-elect Chen Shui-bian.

During the campaign, Chen repeatedly attacked the KMT’s wealth and the web of connections between its business and political interests. He proposed that a special commission be set up to investigate the party’s holdings and that any KMT money obtained illegally be used to set up a social welfare fund.

The KMT’s business holdings became so sensitive an issue that the party’s presidential candidate, Vice President Lien Chan, was forced to promise vaguely that its assets might eventually be put into a trust.

A new book called “The Kuomintang Auction,” published in Taiwan in January, estimates that over the last half a century, the party has amassed a startling $20 billion in assets, including real estate, stock holdings and investments in nearly 300 different companies in Taiwan.

Profits from the KMT’s seven main holding companies added up to more than $500 million in 1998 alone, write the authors, business reporters Tian Hsi-ru and Liang Yung-huang.

Some of the KMT’s wealth derives from state assets that the party bought below market value, the book says, while other money comes from cozy and lucrative contracts. For example, an engineering company owned by the KMT derives 66% of its revenues from Taipower, the state-managed utility.

KMT officials have disputed the figures in the book. A senior KMT official suggested recently that the KMT’s holdings add up to no more than about $3 billion--a sum that, in the United States, would no doubt arouse jealousy even within George W. Bush’s well-financed presidential campaign.

The KMT’s financial assets have played a role not just in Taiwanese politics but to some extent in Washington, where for the past six years KMT officials have funded an extensive lobbying operation.

The business arm of the KMT is run by Liu Tai-ying, a close associate of outgoing President Lee Teng-hui. Liu is also the head of a KMT-allied organization called the Taiwan Research Institute, funded with money from the KMT.

In mid-1994, Liu’s institute signed a three-year, $4.5-million contract with Cassidy & Associates, a prominent Washington lobbying firm.

Soon afterward, Cassidy became heavily involved in the successful effort to persuade Congress to vote to support a visit to the United States by President Lee. That visit, in turn, helped boost Lee’s stature in Taiwan as he was running for the presidency against the Democratic Progressive Party in 1996.

Liu’s institute renewed Cassidy’s lobbying contract in 1997, and Cassidy has recently played a behind-the-scenes role in lobbying Congress to support the Taiwan Security Enhancement Act, a pending measure that would strengthen U.S. defense ties with Taiwan.

Cassidy’s second contract runs out this summer, and it is not clear whether the KMT--now in turmoil as a result of its third-place finish in the presidential election--will want or be able to renew the Washington lobbying effort.

During the campaign, Democratic Progressive officials argued that some of the KMT’s holdings were obtained improperly and should be returned to the people of Taiwan. For example, they said, some assets represent property that was illegally confiscated when KMT troops first arrived in Taiwan in 1947.

Chen told voters during the campaign that he favored the creation of a special, nonpartisan commission to investigate how the KMT has amassed its wealth.

He said he felt that any money the KMT could be proved to have seized illegally should be put into a fund that could pay for social security, health costs and unemployment insurance for the people of Taiwan.

By themselves, the Democratic Progressives would lack enough votes to pass legislation targeting the KMT assets. But Huang, a legislator who served as a top aide to Soong while he was governor of Taiwan, said Sunday that Soong’s allies too would favor a measure to investigate the KMT’s holdings.

“In the next election, the KMT should be merely equal to the other parties [in financial resources],” Huang said.

It is uncertain now whether the Democratic Progressives and Soong’s forces will be able to work together to pass legislation aimed at investigating the KMT’s portfolio. The KMT’s two main opponents will almost certainly be fighting each other on a number of issues, and may also be competing to gain support from the faltering KMT.

On the other hand, there is some precedent for such a marriage of convenience. The Democratic Progressives and another Taiwanese organization, the New Party (which now supports Soong), have worked together in the past to support sunshine and campaign-finance legislation.

Liu I-chou, a professor of political science at National Chengchi University, said KMT officials “are now facing a big dilemma.”

“They’ve got a lot of party-run businesses which the DPP will probably want to reform,” Liu said. “If the party reforms them or gets rid of the party-run businesses, the KMT will suffer a major loss of resources.”