Saehan illegally raises billions of won

It was discovered that Saehan Group illegally raised 60 to 100 billion won from the banking sector through bogus overseas affiliates and fake export and import documents before it was put under a "workout" program.

The Financial Supervisory Service (FSS) said Tuesday that Saehan Group established a paper company in Hong Kong last December and subsequently opened letters of credit (L/Cs) for imports at five domestic banks in order to take out illegal loans worth 60 to 100 billion won.

The banks involved are Hanvit, ChoHung, KorAm, Hana and Shinhan. The group told the banks that it would use the funds as loans to exporters, but it actually sent the money to its affiliate in Hong Kong and then secretly brought it back.

According to an FSS official, the group used the money to pay back its debts to financial institutions in the nonbanking sector. The official said that the FSS is currently conducting an investigation to determine whether the financial institutions checked the purpose of the loans and carried out credit screening properly when they granted the funds.

A managing director of FSS said that the financial supervisory body is also looking into the exact number and size of the illegal transactions and estimated that the amount would reach 60 to 100 billion won. But he went on to say that no evidence was found of any embezzlement of funds by large shareholders, including Lee Jae-Kwan, former vice chairman of the Seahan Group.

Saehan Group was placed under a "workout" program last June and when it took out the illegal loans, the group was suffering from a severe financial crunch. Investigators are also looking into the possibility that banks were bribed in return for opening the L/Cs.