Request for Investigation on the Ex-chairmen of Dongah, Jinro and Haitai

It is expected that chairman of Dongah Construction and Industrial Choi Won Seok, former Jinro chairman Chang Jin-ho, former Haetai chairman Park Gun-bae, and former Woobang chairman Lee Soon-mok will be subject to the Prosecution’s investigation on the alleged window-dressing and illicit fund aid to their troubled subsidiaries.

Korea Deposit Insurance Corporation(KDIC) announced Tuesday that it has investigated the insolvent companies that caused the trouble of banks, therefore leading to the injection of public fund, and requested the Prosecution for further investigation on 25 executives of 11 companies since September last year. The 11 companies include Jinro, Jinro General Distribution, Jinro Construction, Hexxim Teletek, HungChang, Dongah Construction, Hanvit Leasing and Finance, Woobang, Haitai Confectionary and Foods, Haitai Electronics, and Haitai Corporation.

The investigation of the KDIC revealed that Chairman Choi Won-seok cooked the book from 1995 to 1997 so that he could borrow 1 trillion and 112.2 billion won from banks, but failed to repay it, causing the loss of 1 trillion and 434.6 billion won.

Park Gun-bae borrowed money or issued corporate bonds by taking advantage of the financial statements that diminished the size of debt and expense, and therefore inflicted a loss on the banks.

Chang Jin-ho is also accused of window-dressing that brought a loss on the banks and exploiting 88.4 billion won in the subsidiaries’ fund.

Banks also suffered a loss of 30.9 billion won because Lee Soon-mok borrowed money through the fake financial statements. He turned out to have diverted the corporate fund of 6.6 billion won for his private use.

The KDIC has been investigating Lee Jun-ho, ex-chairman of Choongnam Spinning, Park Chang-ho, ex-chairman of Kabool, Chang Soo-hong, former chairman of Chung-ku, Um Sang-ho, former chairman of Kun-young, all of whom were accused of cooking the book and diverting the corporate fund. It is also set to request the Prosecution for investigation on them.

Running an ad hoc investigation team on insolvent companies from December in 2001, the Corporation has finished investigation on 42 companies so far and asked the Prosecution for further investigation on 83 executives of 24 companies among them. In addition, it has claimed damages of 137.5 billion won against 128 executives of 8 companies.

“Under the policy to strengthen the investigation on the insolvent companies, we will investigate 70 companies this year,” said Park Si-ho, a department manager of the KDIC.

Chi-Young Shin higgledy@donga.com