S-Oil Accused of Stock Manipulations.

Arrest warrants have been issued for executives of some large corporations, including the chairman of S-Oil Corporation, Kim Seon-dong (60), who are charged with stocks manipulations, fraudulent accounts and raising slush funds. Issuing arrest warrants for a group of chairmen and executives of large conglomerates for stocks manipulation is an unprecedented matter.

The Special Investigation Department of the National Police Agency applied July 18 for the arrest warrant for the chairman, CEO, chief vice-president, accounting manager and fund manager of S-Oil Corporation on charges of violation of the Securities and Exchange Law. Other five executives of the corporation in charge of overseas business were indicted with the same charges without physical detention.

In December 1999, the executives of S-Oil Corp. allegedly input 339 billion won of the corporate funds in order to raise the corporation’s stock prices that amounted to 10,550 won at the time and bought the bulk of corporation’s stocks after having created 23,000 securities accounts under the name of the executives.

Through the stock purchase, chairman Kim of S-Oil Corp. created 6 securities accounts under the names of his former classmates and daughters as the situation in the stock market became propitious for stock manipulation due to a decreased trade volume.

The corporate executives are indicted for having infused 100 billion won of the corporate money, raised the corporate stock price to up to 56,000 won by placing the total of 23,571 expensive and fabricated orders, and received over 80.4 billion won in excess profits.

The corporation is also suspected of having fabricated its ordinary income and current net income, which in fact suffered losses of 8.8 billion won and 7.7 billion won respectively, by stating them at 29.3 billion won and 26.8 billion won last year after manipulating selling prices of 4 types of gasoline - the yardstick of the corporation’s inventory assets evaluations.

Apart from the above-mentioned charges, S-Oil is indicted of having used 1.3 billion won of a 3 billion won slash fund as reception expenses as well as of having managed its slash fund after purchasing the corporate stocks for 1.7 billion won.

“The matter was brought to our intention when a person from S-Oil Corporation sent us a letter in March”, said Lee Jin-woo, the Chief of the 2nd Investigation Department of the Financial Supervisory Commission, adding that S-Oil is charged with having violated Articles 1, 2 and 3 of the Securities and Exchange Law and with stock manipulations.

Meanwhile, on the same day people close to S-Oil clarified their stance denying all the charges, including fraudulent accounts, stocks manipulations and raising slash funds, and admitting, however, having granted the corporate stocks to close people and the staff in order to protect the company from undesired mergers that might have been inevitable during the foreign exchange crisis.

Hoon Lee Dong-Won Kim dreamland@donga.com daviskim@donga.com