Investigation on Former Employees and Executives

Korea Deposit Insurance Corporation (KDIC) will set for the investigation from next year on the former employees and executives of the financial organizations that are now in normal operation after the support of the public funds, to increase the recollection rate of the funds.

In addition to the investigations on former president of Daewoo Kim Wu-Jung and Kohap`s former president Chang Chi-Hyeok, KDIC will investigate the employees, executives, and large stockholders of about 30 insolvent business next year.

KDIC also revealed that it would investigate on the financial organizations that had recovered from the financial crisis as well and, if any violation of the laws is found, KDIC will temporarily forfeit the properties and file a lawsuit for the compensations.

A related official of KDIC said, "By the investigation on the employees and executives of the insolvent business only, which are eventually closed, KDIC filed a lawsuit against 3263 persons for compensation and the Financial Supervisory Service lodged complaints against 1229 people for criminal cases. From next year, former employees and executives of the currently operating financial organizations will be investigated."

The financial organizations that will be investigated include Hanvit Bank, Foreign Exchange Bank, Choheung Bank, Seoul Bank, Pyonghwa Bank, Korea and Daehan Investment Trust Securities, Korea Life Insurance, and Seoul Guarantee Insurance. The investigations will target on the persons who lend the money to the banks that have bad credit and therefore are suspicious of paying back the loan, who caused damages to the property of financial organizations by illegal investments, and those who are related to the window dressing settlements.

A KDIC official said, "the first trial of over 100 cases among the lawsuits filed by KDIC is completed, KDIC won 78 percent of the lawsuits by the related amount of the cases. KDIC may recollect considerable amount of money since it files lawsuits that the responsibility of the cases could be clearly judged."

However, some worried voices are arising from the financial circle about the KDIC`s strengthening of the investigation.

An official of FSS said, "the investigations on the insolvent financial organizations and related persons and the forfeit of their properties are inevitable but the expansion of the investigation to the recovered financial organization will chill down the financial market by spreading the self-protectionism."

A branch manager of a bank also said, "if KDIC asks responsibility for the bankruptcy of a business to which a bank lent money, banks will not lend money without security or mortgage."

hcs@donga.com