No Records on Auditing Report of MK

Chang Dae-whan, acting Prime Minster, explained that he loaned 3.89 billion won (circa. $3.2 million) from a bank and used the money to pay back the unbooked payment. He had borrowed the payment from The Maekyung (MK), an economics daily, and used it to secure his status as the majority shareholder of MBN, a broadcasting company established in 1993. The auditing report on The MK, however, does not support his allegation. No relevant data are found on the report wherein any transactions like the one at issue should have been recorded.

According to the 2001 auditing report on the MK, which was posted on the web site of Financial Supervisory Service (FSS) on August 19, Chang and the MK did not make any type of financial transactions in the form of buying or selling of any rights, and loaning.

Under the auditing standards provided in the Auditing Act, the footnotes of an auditing report should record any major transactions between a corporation and parties of special interest in it including its largest shareholder, the holder’s direct relatives and executive directors.

Mr. Chang has argued that loaning from We Bank and paying to the MK happened in March of 2002. Thus, Chang’s loaning from the MK should have been recorded on the last year’s report since he paid back the loan this March.

One FSS official confirmed, “Chang borrowed the unbooked payment on a nine-year term, and the amount was amazingly large. It was 3.89 billion won. Thus, the auditing report must have contained any information on the transaction.”

Some even speculate that Acting Premier Chang might have used some of the loan for purposes other than those known to us, considering the omission of the transaction on the report.

Mr. S (31), a CPA, said, “It is hard for a big company like the MK to manipulate its auditing records. It is, therefore, possible that the loan was used not for paying back, but for other purposes.”

In response, Chang explained in the MK, “I cannot disclose details about the exact time I obtained majority shares of MBN or the interests, if any, paid on the principal. All I can tell for now is that I secured my majority using the money I borrowed from the MK when the MBN was established. You will know all the rest during the approval hearing.”