Fair Trade Commission Did not Investigate Hyundai Merchant Marine Co.

Fair Trade Commission has decided not to conduct any investigation whatsoever on Hyundai Merchant Marine Co., which is suspected of having received an illegal loan of 490 billion won (approximately $40 million) and secretly sending the money to North. Thus, Hyundai would not be investigated and its banking records will not be scrutinized.

In the meanwhile, another allegation has popped up, adding more suspicions to what Hyundai did regarding the loan. The new allegation has it that Hyundai had sent more fees than actually required by its overseas corporate branches in US, Japan and Europe, and, after money laundering, used this money for purposes other than business.

On October 8, 2002, the commission announced that, according to its investigation into the internal transactions of Chaebols, which started in July of this year, it has found out 2,000 cases of violation. But it alleges that none of the cases involves Hyundai Merchant Marine Co. or its affiliates. As to those 2,000 violations, it will convene a disciplinary session near the end of this month and determine the appropriate penalties.

Cho Hak-kook, the director general of the commission said, “The probe conducted this time was just for checking out whether Chaebols did what they have to do to enforce the internal transactions as made public. In other words, this probe was not about the loan to Hyundai, nor for finding out illegal internal transactions. Thus, the whole matter was not appropriate to be put as an agenda of the commission.”

But, many experts point out that this probe covered under its scope 6,000 cases of the internal transactions ranging from January of 2000 to June of 2002, for which public advertising was required. Thus, if the commission had put them under scrutiny, it would have easily discovered where the loan Hyundai had received was used.

Actually, what the commission has argued contracts what the government and Industrial Bank have alleged. The government and the bank have said that the loan was used mostly as subsidies to its affiliates. Therefore, it is impossible for the commission to avoid the criticism that it lacks the will to find out the truth.

In addition, the commission has just kept saying, “We are conducting a legal research to determine the legality of the omission” of the 400 billion won of over-drafting Hyundai had received. Hyundai did not put the over-drafting on the financial statement submitted during the probe in Aug. of 2000 into the alleged illegal internal transactions between Hyundai Merchant Marine Co. and its affiliates. In short, the commission seems to have no will at all to conduct a substantial investigation or penalize Hyundai.

In the meanwhile, according to the 2000 auditing report of Hyundai Merchant, it wire-transferred 121.8 billion won to its overseas affiliate corporations in US, Japan and Europe in the name of business operation fees. Again in 2001, it reportedly sent 115.7 billion won.

One industry source said, “Considering the volume of Hyundai’s sale, it is not theoretically impossible to pay that amount of money as fees. But it is way too much, I guess.”

On the other hand, its auditing report of 1999 did not show any recorded transaction between Hyundai and its overseas corporations. Thus, it is being suspected that Hyundai sent more money in the name of fees that actually required by its overseas corporations for money laundering purposes. And then, it may have used the money for other purposes.

Moreover, the transaction volumes on the auditing report of Hyundai Merchant and its linked auditing report, and the report of Hyundai Ahsan are different from each other. Thus, the suspicion of use of window dressing in preparation of the reports is getting larger and larger.

In response, Hyundai just refused to explain and said, “We do not response to each and every case.”