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Last 7 Days News : SU MO TU WE TH FR SA All News

Monday, September 20, 2004
Infodisc founder undone by losses and allegations

Davie Lu, who started Infodisc with just NT$250,000, has stepped down recently amid insider trading charges and losses at the optical disk firm...

According to Taipei Times "...At the opening of a press conference at the Taiwan Stock Exchange Corp (TSE) on the afternoon of Sept. 2, David Lu was too upset to speak. For the first five minutes he turned his back to reporters, sobbing.

When Lu, 38, founder and former chairman of the scandal-ridden Infodisc Technology Co finally turned around, he told the press he owed investors many apologies for unprecedented losses posted by the company in the first half of the year.

He denied any wrongdoing but admitted a decision to invest in Mediacopy Texas Inc in the US had been a mistake. The company was forced to write off NT$4.28 billion (US$127 million) in losses this year related to the investment.

From January to June, Infodisc reported a pretax loss of NT$4.31 billion, or net negative earnings per share (EPS) of NT$6.93, on revenues of NT$865 million. Last year, the pre-recorded DVD maker reported pretax profits of NT$193 million on revenues of NT$2.82 billion.

"I will take full responsibility for making the decision [to invest in Mediacopy] and resign as chairman," he said at the time.

Lu had actually resigned from his post a day earlier, after submitting the company's six-month financial report to the TSE.

Infodisc acquired Mediacopy in 2001 for US$100 million via a holding company, Infodisc Global Holdings Inc. The purchase was intended to help the company land pre-recorded digital versatile disc (DVD) orders from Hollywood studios, mainly Metro-Goldwyn-Mayer Inc.

Over the last four years, however, Infodisc has seen no earnings from Mediacopy, and has instead written off nearly NT$9 billion in losses related to the El Paso, Texas-based firm.

In the face of the losses, Lu vowed to reorganize Infodisc, implement job cuts at Mediacopy and consolidate overseas subsidiaries. Investor confidence began to weaken, however, amid these problems. Lu's failure to present solid proof to the Taiwan Stock Exchange of a US$77.75 million (NT$2.62 billion) investment in the Gold Target Fund, registered in the Cayman Islands, has further eroded investor trust.

More criticism and doubt came over Lu's failure to explain what happened to US$110 million the company raised in June 2002 from selling bonds convertible into its own shares.

Amid speculation about possible embezzlement and concerns over alleged insider trading, Lu defended himself at another press conference on Sept. 6, saying he was innocent. He also outlined plans to close offices in South Korea and Germany, and sell company properties valued at NT$3.5 billion to cover losses.

But Lu is also no stranger to allegations of securities fraud..."

To read the entire article, click at the 'Source' icon!

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