$30 Million Lost in Diplomatic Scandal, Taiwan Says

By Jane Rickards
Special to The Washington Post
Sunday, May 4, 2008

TAIPEI, Taiwan, May 3 -- Two middlemen entrusted with almost $30 million in Taiwanese government funds as part of a secret effort to forge diplomatic relations with Papua New Guinea made off with the money and are refusing to give it back, according to officials in Taiwan.

The scandal has further embarrassed President Chen Shui-bian's administration only 17 days before he is to leave office. It is the latest in a series of financial irregularities involving his wife, son-in-law and political associates that have tarnished his pro-independence Democratic Progressive Party and contributed to its loss to the Nationalist Party in the presidential election in March.

The money's disappearance illustrated the behind-the-scenes inducements, often called dollar diplomacy, used by Taiwan and China in their relentless struggle over diplomatic recognition. In recent years, Taiwan has fared poorly in the contest, reduced to 23 countries -- most of them small and impoverished -- that accord it recognition. Mainland China has gained recognition from 170, all of which acknowledge Beijing's right to rule over all of China.

Foreign Minister James Huang told Taiwanese reporters that Vice Premier Chiou I-jen, one of Chen's closest aides, handpicked the two men to convey the funds in 2006. Huang and Chiou both said they had no idea where to look for the money, an estimated $29.8 million withdrawn from secret funds used to induce governments and leaders to extend diplomatic recognition to the self-ruled island.

"The key to this case is not that our diplomatic work has been negligent, but it is that the people we trusted had problems with loyalty," Huang said at a news conference Friday.

Huang denied that the money was to be used to bribe officials in Papua New Guinea and said that it was intended for a variety of development projects in the tiny South Pacific nation. "This is no so-called dollar diplomacy," he said.

Chiou, who at the time headed Chen's National Security Council, met the men several years ago. Taiwanese officials identified them as Ching Chi-ju, a U.S. passport holder, and Wu Shih-tsai, a Singaporean national.

Believing they had influence over political figures in Papua New Guinea, he introduced them to the Foreign Ministry.

The government-run Central News Agency said the Foreign Ministry, on the strength of Chiou's recommendation, deposited the money into a Singaporean bank account jointly held by Ching and Wu. Huang said Papua New Guinea told Taiwan it needed the sum as a guarantee while talks were underway about switching relations from mainland China to Taiwan.

After months of fruitless talks, Taiwan decided that Papua New Guinea was not committed to becoming a long-term ally and ended the negotiations. But the two intermediaries did not return the money, and Ching dropped out of sight.

Huang said the ministry tried to keep the fiasco secret. Taiwanese officials visited Ching's wife in Los Angeles several times, he said, and pleaded with her to try to get him to return the money. When that failed, Taiwanese representatives brought suit in Singapore seeking to freeze the two men's bank account. As a result of the court action, the episode was reported in the Singaporean media and then exploded onto the scene here in Taiwan.

Wu is believed to be in Singapore, barred from leaving pending an investigation, according to Taipei's United Daily News. Ching's whereabouts are unknown. Huang and Chiou were questioned by Taiwanese investigators, meanwhile, to see whether corruption was involved.

Chen was briefed when the money went missing, Huang said, but did not know all the details.

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