TAIPEI/SAN FRANCISCO Taiwan's AU Optronics Corp will appeal a guilty verdict by a U.S. court in a price fixing suit over liquid crystal display panels that could leave it facing a fine of up to $1 billion just as it looks to recover from a series of losses.
AU, the world's No.4 LCD maker, was charged as part of an investigation into an alleged price-fixing cartel between 1999 and 2006, but was the sole Asian LCD maker to plead not guilty. It told a media briefing in Taipei on Wednesday that the appeal process could last more than a year.
Tuesday's verdict came after rival LG Electronics Inc agreed to pay a $400 million fine in 2008, while Samsung Electronics Co Ltd cut an early deal to avoid prosecution.
"We estimate the final fine could be at least T$15 billion ($508 million)," said Eric Kao, analyst at KGI Securities in Taipei.
"But with the provisions AU has made so far the shortfall will be less than T$10 billion, and since the company has about T$120 billion available, there will be no problem getting the money."
AU said in a briefing it would continue to book provisions for the case on a quarter by quarter basis according to the progress of the case.
"Up to the end of last year we have made enough provisions, according to our accountants' advice," Chief Financial Officer Andy Yang told the briefing, but he declined to give a figure for the provisions.
Its shares extended losses to more than 5 percent after the briefing and were last trading down 4.73 percent at T$15.15 in a broader market up 1.1 percent.
U.S. prosecutors accused company executives of meeting more than 60 times at luxury hotels to fix prices of LCD panels, saying the conspiracy cost the U.S. economy billions of dollars.
In a statement, the U.S. Justice Department said AU Optronics faces a maximum fine of $1 billion. AU's legal adviser said at the Wednesday briefing the court would evaluate the size of AU's business in the U.S. from 2001 to 2006 before deciding on the fine.
Two AU executives were also found guilty, but former AU chief executive L.J. Chen -- who remains a top executive at the company -- and a fourth executive were found not guilty. Chen's family members wept with relief when the verdict was read out in a San Francisco federal courtroom.
"While the company is gratified for the acquittals against the executives, the company is deeply disappointed by the guilty verdict," AU said in a statement on Wednesday.
"(The company) remains confident that the corporation and the individuals will ultimately be vindicated during further proceedings in this matter."
Any large fine would come at a difficult time for AU, which, like other panel makers is struggling with falling prices and demand. Most makers have posted several quarters of losses.
AU itself reported a worse-than-expected loss for the fourth quarter earlier this month, but forecast a pick-up this year and stable panel prices.
The company would have to take a bigger provision to cover any fine and the legal costs of its appeal, but the ruling should not affect its wider operation since new management was now in place, said an analyst who declined to be identified.
"Depending on when AU books the provision, the company may still be able to see a profit in Q3," he said.
On Tuesday, the jury decided that the total amount of gross gains derived from the conspiracy -- in which several other producers have been accused -- came to at least half a billion dollars.
Dennis Riordan, an attorney for AU Optronics, said after the verdict that the jury was not asked to answer the most pressing question -- whether U.S. price-fixing laws apply to acts committed on foreign soil.
During the trial, one of AU Optronics's lawyers also argued that the company "competed fiercely" and the mere exchange of information between companies was not illegal.
The company added in its statement that it "presented undisputed evidence that it consistently priced below the so-called crystal prices from 2001 to 2006, which the company believes to be solid evidence that it did not participate in any price fixing agreement."
Before the trial, Riordan said, U.S. District Judge Susan Illston rejected a motion to dismiss the case because the alleged crimes took place outside the United States.
"This is a huge case," he said. "It's really the appeal that's going to determine what this means."
One of two convicted AU executives, Hsuan-Bin Chen, is currently vice chairman of the company's board. The jury also convicted Hui Hsiung, and it acquitted Tsannrong "Hubert" Lee. The panel deadlocked 8-4 in favor of convicting Shiu Lung "Steven" Leung, according to a juror.
Illston will sentence the two men found guilty and impose fines against the company after she hears motions for a new trial.
(Reporting by Edwin Chan and Dan Levine in SAN FRANCISCO, and Clare Jim and Argin Chang in TAIPEI; Editing by Clarence Fernandez)