Taiwan scandal over missing fund expands

Sun May 4, 6:04 AM ET

TAIPEI, Taiwan - A scandal over a multimillion-dollar diplomatic bungle in Taiwan expanded Sunday after another member of outgoing President Chen Shui-bian's inner circle was questioned by prosecutors.

Vice Minister of Defense Ko Cheng-heng was questioned Saturday night over the loss of $29.8 million that the government had set aside for establishing diplomatic ties with the Pacific nation of Papua New Guinea, the Defense Ministry said in a statement.

"The vice minister told (prosecutors) that he was innocent," the brief statement said.

The loss of the money highlights the measures Taipei is willing to take to persuade countries to establish diplomatic relations, recognizing Taiwan as a sovereign country apart from China.

The scandal broke last week after a newspaper reported authorities were suing a Taiwanese man identified as Ching Chi-ju in an attempt to recover the missing money. Ching has disappeared.

Ching allegedly acted as an intermediary in a later-abandoned attempt by Taiwan to secure ties with Papua New Guinea. The funds were intended for economic aid to the Pacific nation once diplomatic relations were established.

Prosecutors questioned Foreign Minister James Huang and Vice Premier Chiou I-jen on Friday after both acknowledged the diplomatic bungle and offered to take political responsibility.

Chiou said Vice Defense Minister Ko had introduced Ching to him, so he did not conduct a security check on the man before the government transferred the money in 2006 to Ching's Singapore bank account.

He said Ching disappeared in December 2006, causing the government to fail to get its money back after it decided to abandon the Papua New Guinea deal.

On Sunday, opposition lawmakers asked prosecutors to investigate Chen, who finishes his second and final four-year term as president in two weeks, for possible links to the scandal.

All three senior officials who have been questioned are Chen's confidantes. Ting Shou-chung of the Nationalist Party suggested that Chen may have arranged the Papua New Guinea deal after accepting political donations from Ching.

Since they split amid civil war nearly 60 years ago, Taiwan and China have engaged in an all-out war to win diplomatic allies.

China, which considers Taiwan part of its territory, has used its rising economic clout to reduce the number of Taiwan's allies to only 23. In turn, Taiwan has tried to use economic enticements to lure some allies back.