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Reinvestigation of S-Oil Ordered

Posted July. 19, 2002 22:13,   


The Prosecutors’ Office directed the police to reinvestigate into the alleged wrongdoing of S-Oil management including the chairman Kim Sun-dong (60). The management members are charged with window dressing and illegal manipulation of stock prices. Upon the request by the Special Crime Investigation Division (SCID) of Seoul Metropolitan Police, the preliminary arrest warrants are now pending.

Therefore, it will take a considerable time for the police to actually obtain the warrants for them. One prosecutor said, “On the whole, a considerable amount of circumstantial evidence is in hand. To secure more hard evidence, we ordered a reinvestigation of all the suspects. Only small fraction of them seems to deny their wrongdoing and the defense team has produced large volume of evidence for their cross-examination. Thus, it would take long for the police to obtain the warrants.”

He continued, “This case is not just about stock-price manipulation. It’s really complicated in nature.” One police official confirmed, “Regarding the stock-price manipulation charge, we have evidence such as online transactions’ descriptions enough to prove the charge against them. With regard to the window dressing, we are consulting government financial exports. We are also conducting criminal inquiries into the accounting firm which has audited S-Oil.”

He added, “S-Oil has built up a slush fund of 300 million won (approximately 28 million dollar) without booking them. Thus, if the money is found to be made through tax evasion, we will report it to National Tax Service.” Some point out, however, that the SCID, blinded by enthusiasm and popularity, made a hasty announcement. The SCID is considered a best special force within the police and has investigated the charges for 4 months. But the Prosecution did not find satisfaction in the results provided by the SCID.

One stockbroker said, “S-Oil’s alleged manipulation is such a delicate matter for me to comment on. Some even consider their conduct a stock-management rather than a manipulation.” Also, some experts dispute the allegation that S-Oil illegally conducted the window dressing practice. The company changed not only the prices on the ledgers but also those of the oil actually transacted. Thus, some experts agree to S-Oil’s contention that they just performed reevaluations.

Some accounting experts predicted, “There sure is a problem in terms of corporate morality. But it will be hard to prosecute them for that.” On the day the police announced its investigation results, S-Oil ran an ad in every major paper explaining their position under the title “S-Oil’s Position on the Investigation Caused by a Tip-off.” In that ad, S-Oil argued, “This whole debacle is caused by an insider’s tip-off of the police only for the purpose of harming us. We will prove our innocence in the court of law.”

Hoon Lee Myoung-Gun Lee dreamland@donga.com gun43@donga.com