Foxconn confirms involvement in bribery scandal

Want China Times, Staff Reporter 2013-01-10

Police vehicles enter Foxconn's Taiyuan plant in Shanxi province after
an incident last year. (Photo/CNS)

Taiwan-based Foxconn, the world's largest electronics contract manufacturer, has admitted that the company is currently conducting an internal investigation into allegations that senior executives took bribes from suppliers in China and confirmed that it is cooperating with police on both sides of the Taiwan Strait.

The electronics giant, best known for making Apple's iPhones and iPads in China, released a statement on Wednesday in response to a report in Taiwan's Next Magazine, which first broke the story, denying "most" of the allegations in the magazine article but without providing specifics. The statement added that Terry Gou, the founder and chairman of Foxconn and its parent company Hon Hai, has instructed the group to identify and pursue all those involved in bribery activities and to evaluate internal controls to prevent the same from happening in the future.

Next claimed that Teng Chih-hsien, a manager with Foxconn's surface-mount technology department, was arrested by authorities in Shenzhen four months ago. Teng's department is authorized to sign lucrative contracts for equipment used by the company's various business groups and allegedly took bribes in exchange for supply contracts over an extended period of time. More than 40 suppliers have been linked to the scandal, which involves contracts worth billions of dollars, the article said.

Teng is far from the only senior executive suspected, and his arrest has sent more than a dozen others fleeing back to Taiwan, including retired former SMT department deputy general manager Liao Wan-cheng, the magazine added.

It was Gou, who has reportedly known about the allegations since July or August last year, who insisted that the case be handled strictly in accordance with the law, according to Next. Sources told the magazine that when he was informed of the issue by a Foxconn manager in charge of ethics and business violations, an infuriated Gou demanded that the perpetrators be sacked after coughing up the funds. Unlike most other Taiwanese companies in China facing bribery accusations, however, Gou had no intention of keeping the problem in-house and immediately reported it to mainland authorities.

Foxconn says that a preliminary internal probe has found that only the company's procurement executives were involved and that upper management is not under suspicion.

Under China's laws, non-Chinese nationals can be sentenced to a maximum of five years imprisonment for accepting bribes, while the maximum penalty for bribing another party is 10 years imprisonment.

Foxconn has already reportedly cut ties with testing automation equipment supplier TRI Innovation over the bribing allegations, although a spokesperson for the Taiwan-based supplier denied losing a major client and said that the company does not comment on specific customers.

Foxconn's statement on Wednesday also said that its supply chain involving Taiwanese businesses in China, its personnel in China, and its business development are normal and have not been affected by the allegations.　

References:

Terry Gou　　郭台銘

Teng Chih-hsien　　鄧志賢

Liao Wan-cheng　　廖萬成

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