PM Designate Borrowed Money with Maeil Deposit as Collateral

Prime Minister designate Chang Dae-whan is reported to have borrow 2.39 billion won with the corporate deposit of Maeil Business Newspaper as collateral and used the money to pay back his debts to the newspaper.

The fact came to light as Maeil Business Newspaper submitted documents on the 22nd to clear up suspicions over the usage of 3.89 billion won Chang borrowed from Woori Bank, predecessor of Hanvit Bank.

According to the documents, Chang borrowed money from Maeil Business Newspaper to secure stake of the newspaper`s affiliates such as Maeil Business Network (MBN), Maeil Business Internet and Maeil Printing Co. Then he borrowed 2.39 billion won from Woori Bank with the deposit of Maeil Business Newspaper as collateral.

The president, who had no stake in his company, exploited the corporate fund to increase his personal stake in other companies.

Maeil Business Newspaper said that the newspaper established the right of pledge for the 2.72 billion won worth of stakes of Maeiil affiliates possessed by Chang in order to ensure the fulfillment of an obligation over the company`s deposit.

But a certified public accountant said, "There are some cases that major stockholders or executives raise operating fund with their personal assets as collateral when a company is in economic difficulties, but it is a rare case that a CEO, who does not have any stake in his company, uses the corporate fund to increase his personal stake in other companies. It can be translated as a moral hazard of a businessman."

According to the documents, the newspaper indirectly acknowledge that Chang`s use of corporate fund has not been mentioned in the audit report since as an unlisted company, the newspaper`s standard of drawing up accounting reports is not as rigid as that of other listed companies."

Meanwhile, Chung Hyun-hee, Chang`s wife, is reported not to pay health insurance fees for three years from 1999 although she had a regular income. Rep. Uhm, Ho-sung of the special committee for Chang`s confirmation hearing said on the 22nd, "According to the statement of income tax payment for the past three years submitted by Chang, Chung earned income worth 17 million won in 1999 and 2000 each, and 16 million won in 2001 at a company run by her mother. But she did not pay health insurance fees from 1999 to October, 2001."

Jin-Hup Song Seung-Heon Lee jinhup@donga.com ddr@donga.com