Last month, a Taiwanese court threw the book at the once prominent Wang family, former lords of the Rebar Asia-Pacific Group empire and since convicted of embezzling more than NT$73 billion from investors through The Chinese Bank, Great Chinese Bills Finance Corp., dummy corporations, bogus accounts and other illegal means. A total of 107 suspects were indicted in connection with the case, a record in the annals of Taiwanese financial crime.

District Court judges further accused 15 officials responsible for regulating the financial sector, including former finance ministers Lee Yung-san and Lin Chuan, of malfeasance and aiding and abetting illegal activities in their role as the relevant competent authorities.

On January 9, Lin Chuan, now chairman of Vanguard International Semiconductor Corp., broke his silence, anxiously declaring that if the judiciary becomes divorced from reality, then every one of Taiwan's more than 530,000 civil servants will soon find themselves toiling under an ominous shadow.

I've decided to accept interviews today because I want to speak out on behalf of civil servants. The way I see it, the Rebar debacle was a problem of the system, not a people problem.

The problems with the Rebar Group had been building for a long time. The Chinese Bank became problematic prior to 2000. The Wang family's eventual establishment of Great Chinese Bills Finance Corp. was surely a reaction to operational restrictions regulators imposed on the bank in accordance with financial disclosure reports. When they couldn't play with the bank anymore, they drilled the loopholes of Great Chinese Bills Finance.

Shall We Prosecute Firefighters after a Fire?

The Rebar debacle was more than a decade in the making, and the problems were not solely with Rebar. If the same standards were to be applied when Chung Shing Bank, Enterprise Bank of Hualien, Taitung Business Bank, and the Fourth Credit Cooperative of Chang-Hwa previously became problem institutions, then there must have been widespread involvement of financial regulators over nearly two decades. Do you really believe that all the civil servants in the Bureau of Financial Affairs were bad guys? But if an agency accomplishes nothing year in and year out, perhaps the judges and society ought to consider what kind of system allows regulators to only go so far.

It's sort of like having inconclusive fire safety laws that leave firefighters exposed to prosecution in the event of a fire.

I'm afraid nobody really realizes how tough officials with the Bureau of Financial Affairs have it. When I was finance minister, investment was quite weak. The Executive Yuan called a meeting and demanded that the Ministry of Finance raise the limit on banks' investment in non-financial sector stocks from 5 percent to 10 percent.

When I went to that meeting, I brought along then Bureau of Financial Affairs director Gary Tseng, who was adamantly opposed. I thought he had a point. During that meeting, there was much shouting and pounding of fists on tables, but he was unshakable. You could really see his routine disregard of external pressure. And still a judge accuses this kind of civil servant of impropriety.

The crux of Taiwan's financial problems is that the entire society, including the relevant regulatory authorities, is terrified of allowing banks to fail, so they dare only employ limited measures and shy away from taking the harshest measures.

In the past, a bank had to be operating at an extremely low level before it warranted a takeover. A bank almost had to suffer a run before it was taken over. The problem is that the occurrence of a run demonstrates that a bank's condition is already terminal – as soon as the goods are damaged, everyone checks out. But a takeover when net asset value is still above zero requires crystal-clear legal grounds and guidelines, lest shareholders file suit at the moment of the takeover on grounds of property rights infringement.

The most obvious example of that was when Yen Ching-chang headed the ministry's takeover of 36 farmers and fishermen's associations, and later, officials were sued. This is why officials are afraid of takeovers – there are no clear legal guarantees protecting them.

During the 1990s, Taiwan's financial sector underwent a wave of liberalization and deregulation, but there was no accompanying exit mechanism. When I arrived at the finance ministry, officials told me there were 10 troubled banks needing some kind of financial restructuring fund to take control. The problem was, when I took over, the Legislative Yuan didn't allocate an extra dime for the finance ministry.

Why Should Civil Servants Live under Daily Threat of Lawsuit?

This is a macro-environmental issue, and officials can only trade time for space. What society needs to look at is: when a problem is recognized, why can the executive and legislative branches not act in a timely fashion to amend the law to address that problem, but instead turn officials into scapegoats, thereby creating psychological disharmony within the overall bureaucracy?

The civil servant's first reaction is really to just quit. Since the Rebar case, officials in the Banking Bureau, and even in the Securities and Futures Bureau, have been talking about quitting. Political appointees come and go, but the civil servants are the ones who sign and certify public documents. If we allow these civil servants to live in fear of the day they might run into the wrong judge, under a constant shadow of suspicion, how are they supposed to sign their names to those documents day in and day out?

The safe thing to do is simply pass the buck upward – just not take responsibility for anything. The power of a government agency lies with everyone in the agency. Responsibility should be spread across all tiers. If those at the bottom are unwilling or too fearful to do anything, the managerial ability of the entire agency is weakened, and this is something to be concerned with. In the long term, this will lead to a process of elimination in the wrong direction, where the bad people drive away the good people.

Translated from the Chinese by Brian Kennedy

Chinese Version: 林全：莫讓公務員成代罪羊