Insolvency of KRW 1 Trillion Provisional Seizure of KRW 52.4 Billion

Korea Deposit Insurance Corporation (KDIC) announced, “We found that 74 owners and employees of three groups such as Dainong, Kukdong Engineering & Construction and Nasan brought about the insolvency of KRW 980.4 billion.”

KDIC requested an investigation of 16 people including Park, Yeong-Il, former president of Dainong, Gim, Yong=San, the former president of Kukdong Engineering & Construction and Ahn, Byeong-Gyun, the former president of Nasan and other employees & executives, from the prosecution for a fraud and embezzlement violation.

As the result of investigation, KDIC put under provisional attachment amounted to KRW 52.4 billion for the real estates and stocks of former presidents of three companies due to the insolvency ; △KRW 436.3 billion for Dainong & Midopa △KRW 250.5 billion for Kukdong Engineering & Construction △KRW 293.6 for Nasan.

KDIC explained that three companies indulged in issuing the corporate bonds and lending from the financial institute through Window-dressing, supporting the illegal fund on insolvent affiliate companies, providing the illegal funds on families of large shareholders, and in producing the slush fund.

As ShinDongBang Corporation tried the Hostile M&A for Midopa in 1997, Midopa lent KRW 87.7 billion of funds to 3 affiliated companies including Metro-Product and tried to buy the securities of Midopa. However, after 2 months, it could not endure the financial difficulties, and so the Insolvency Postponement Agreement was finally applied.

Kukdong Engineering & Construction made the slush funds expanding the personnel expenses and equipment costs in the construction field from 1992 to 1997. The former president used the funds for the private purposes such as the antique purchase. Nasan Nasan Construction lent KRW 75.6 billion to Mr. Ahn, former president from 1994 to 1997 as the short-term loan, but still hasn’t get back from him.

Besides, KDIC has been now investigating the insolvent responsibility on Dongah Construction & Industrial, Jinro, Hexxim Teletec and HungChang.

Do-Young Kim nirvana1@donga.com