Top Conglomerates Face Insider Trading Probe

The Fair Trade Commission (FTC) will launch an inspection from April into six top conglomerates of Samsung, LG, SK, Hyundai, Hyundai-Kia Motors Company and Hyundai Heavy Industries regarding illegal insider trading.

It is the first time in three years that the Commission conducts an all-out investigation into major conglomerate groups. In the previous inspections from 2000, the FTC only checked out whether conglomerates complied with insider trading disclosure rules.

The FTC announced today that 10 other conglomerates and big public corporations would also be subject to inquiries in the latter half of this year following the inspections into top six groups in the second quarter.

Fair Trade Commission investigation bureau director general Chang Hang-seok said, “We will investigate all irregularities including unfair subsidized deals between subsidiaries, improper use of power, and unfair outsourcing contracts.”The conglomerate groups will be investigated regarding their illegal insider trading activities from 2000 to 2002.

An FTC official said Hyundai-Kia Motors Company and Hyundai Heavy Industries are also subject to inquiries since the two groups are spin-offs from Hyundai Group. But, the FTC will not investigate SK Group`s Walkerhill hotel stock trade and a secret contract with JP Morgan, which are now subject to the prosecution’s probe.

The Commission also said that it would not probe into insider trading over the takeover of Doosan Heavy Industries and Construction and LG Chemical’s stock trade since they are already subject to inquiries or related investigations were finished.

Public companies to be inspected in the second half include Korea Electric Power Corporation (KEPCO), Korea Land Corporation, Korea National Housing Corporation, Korea Water Resources Corporation, Korea Gas Corp, and Korea Agricultural & Rural Infrastructure Corporation.

The Commission will probe into compliance with insider trading disclosure rules of 10 other conglomerates including KT, Hanjin, and Kumho in the fourth quarter. Privatized public companies such as KT and Posco will be subject to fourth quarter inspection of the private companies.

Eun-Woo Lee libra@donga.com