Board of Audit & Inspection Files Criminal Claim Against Hyundai Marine Merchant

The Board of Audit and Inspection of Korea has reportedly decided to file a criminal claim with the DA`s Office through its subcommittee on January 23 against Hyundai Marine Merchant. The board has conducted a probe into the illegal loan scandal so far. The scandal has it that Hyundai made an illegal loan of $400 million from Industrial Bank, and gave it to North Korea on behalf of Kim Dae Jung administration. The board announced that it could no longer continue the probe due to Hyundai`s refusal to submit requested documentation and its own limitation in tracking banking records, making it impossible for the board to disclose uncover where the loan was spent.

One official of the board confirmed yesterday, "We have made official requests to Hyundai over three times since last November for submission of documentation. Every time we requested, it asked for postponement. Again on January 17, it denied our request. There`s nothing we can do about it. We will just wrap up our investigation."

He also said, "We have audited the company since October 14, 2002. According to the auditing, the bank made out 65 checks in the amount of $400 million as loan to Hyundai. 39 of them [i.e. a little less than half of the total] were used for business purposes by Hyundai. But as to the remaining ones, we have no other way to verify their expenditures."

He added, "Just by looking into the endorsements on the checks at issue, we could not track down exactly where the checks were used. Some of the names written on them are illegible or others are unidentifiable. A comprehensive tracking will only find it out."

In the meanwhile, Hyundai Marine Merchant reportedly notified the board on last Friday that it could comply with the board`s request only near the end of this month due to its issuance of asset-backed securities.

The company confirmed yesterday, "We have recently issued the securities and raised a fund of 250 billion won [or approximately $200 million] for paying back loans. In addition, we are pursuing another issuance with POSCO, putting up a long-term transportation agreement for collateral. Thus, we are not in a position to submit the requested documentation for now. When the deal is consummated near the end of this month, then we could cooperate with the board in its investigation of the loan scandal."

It is not understandable at all to link the issuance to the submission of the documentation. Now, many people criticize the lack of will on the part of Hyundai. Last year, Hyundai came up with another excuse for declining the request—sale of its vehicle transportation vessels.

On the other hand, Criminal Division 9 of the Seoul District Public Prosecutors` Office announced yesterday that it would launch its formal investigation in earnest as soon as it obtains the board`s investigation results. The DA`s Office has conducted a preliminary probe into the matter by taking statements from complainants and reviewing relevant data including newspaper articles. Moreover, the office has prohibited Industrial Bank`s officials allegedly involved in the scandal including its former vice president Park Sang-bae.

In the meanwhile, the DA`s Office is persuading other officials of the bank staying abroad through their relatives and colleagues to have them come back to Korea as early as possible.

Hyundai Asan`s chairman Chung Mong-june has left for North Korea alleged for business purposes. Two days prior to the departure, he came back from the United States where he had stayed for about 4 months without any special activities. Asan confirmed that Chung would be back on Tuesday afternoon.

Myung-Jai Lee Dong-Ki Sung mjlee@donga.com esprit@donga.com