Kohap Group investigated for fraud

The Seoul District Prosecutor¡¯s Office External Affairs Division is investigating Kohap Group, which allegedly fabricated export documents for non-existing polyester raw material, then made large deposits into a Korean bank and then diverted the money to other uses.

According to prosecutors, Kohap Group began to fabricate export sales contracts for three months beginning in June 1997 with a company in Hong Kong for the shipment of polyester raw material. Then, a letter of credit for the non-existing shipment by the Hong Kong company was cashed through a Korean bank in the approximate amount of US$30 million, which was used for repayment of Kohap's debts.

The prosecutors have summoned the management at Kohap for a full investigation, and should the charges be found probable, Kohap management will face criminal charges for violation of customs laws among others.

"At the time, due to the liquidity crunch, production of the raw material came to a halt, and we could not fill the order,¡± a Kohap Group spokesperson said. ¡°Currently, about 15 million won worth of polyester raw material has been shipped abroad. We had no intention of breaking the law."

The Seoul District Prosecutor¡¯s Office External Affairs Division is investigating Kohap Group, which allegedly fabricated export documents for non-existing polyester raw material, then made large deposits into a Korean bank and then diverted the money to other uses.

According to prosecutors, Kohap Group began to fabricate export sales contracts for three months beginning in June 1997 with a company in Hong Kong for the shipment of polyester raw material. Then, a letter of credit for the non-existing shipment by the Hong Kong company was cashed through a Korean bank in the approximate amount of US$30 million, which was used for repayment of Kohap's debts.

The prosecutors have summoned the management at Kohap for a full investigation, and should the charges be found probable, Kohap management will face criminal charges for violation of customs laws among others.

"At the time, due to the liquidity crunch, production of the raw material came to a halt, and we could not fill the order,¡± a Kohap Group spokesperson said. ¡°Currently, about 15 million won worth of polyester raw material has been shipped abroad. We had no intention of breaking the law."

gun43@donga.com