Former Far Eastern Air Transport Chairman Sentenced for Fraud
Zhang Gangwei, the former chairman of Far Eastern Air Transport, was sentenced to 14 years in prison by the Taipei District Court on September 30, 2024. Zhang was found guilty of multiple violations of Taiwan’s Securities and Exchange Act, including falsifying financial documents and embezzling large sums of money.
Far Eastern Air Transport ceased operations in late 2019, citing financial challenges and long-term operating losses. At the time, the airline was operating a modest fleet of six ATR72-600s, four MD-82s, and three MD-83s, primarily servicing routes from Taipei Sung Shan, Kaohsiung, and Taichung Ching Chuan Kang to Penghu and Kinmen. However, just months after the airline’s closure, Taiwanese authorities turned their attention to Zhang, detaining him on fraud-related charges. He remained in custody for around a year before being released on bail.
On July 31, 2021, Zhang was formally indicted along with nine others, with prosecutors alleging that he used Far Eastern to financially support his non-aviation business ventures. The airline, which had struggled financially since the early 2000s, was further weakened by Zhang’s actions, according to prosecutors.
Far Eastern underwent a court-supervised restructuring process in 2008, similar to the U.S. Chapter 11 bankruptcy procedure. Zhang took over the airline by presenting falsified financial statements, claiming that his conglomerate, Huafu Enterprise Holdings Ltd, was financially capable of supporting Far Eastern’s recovery. However, this proved to be false, and the airline’s financial woes deepened under Zhang’s leadership.
Prosecutors highlighted several instances of fraudulent activity. In 2015, Zhang secured a TWD1.3 billion (USD40.9 million) loan for Far Eastern at a high interest rate of 6.5% per annum. Instead of using the loan to support the airline, Zhang transferred the funds to his own company, Huafu Enterprise Holdings, leaving Far Eastern to repay the loan. In 2016, he secured another TWD2.2 billion (USD69.2 million) loan, which was similarly misused to pay off Huafu’s debts. Prosecutors further revealed that Zhang misappropriated an additional TWD800 million (USD25.2 million) from Far Eastern.
When Taiwan’s Civil Aviation Administration (CAA) conducted an audit of the airline’s finances, Zhang forged documents to conceal his activities, presenting the illegal transfers as loans from Far Eastern to Huafu. The audit raised concerns within the CAA, which prompted them to order Far Eastern to recover its loans to stabilize its financial position. Instead, Zhang offset the airline’s account receivables with a property development project belonging to Huafu, further entangling the companies’ finances.
In addition to his 14-year prison sentence, Zhang received an additional 12-month penalty, which can be reduced if he pays a fine. The court also ordered Zhang to repay TWD3 billion (USD94.6 million) that he embezzled through his fraudulent activities.
This case marks the conclusion of a significant chapter in Taiwan’s aviation history, with Far Eastern’s demise now closely tied to the fraudulent actions of its former chairman.
Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com