Covering-up of Insolvency and Loan Fraudulence in 390 Billion Won from Public Fund

The Special Investigation Headquarters (Head: Ahn Dae-hee, investigation department of Supreme Prosecution Office) announced today that it had arrested Ko Byung-woo, former Chairman of Tonga Construction Co., Park Young-il, former Chairman of Daenong Group and 10 other persons suspected of loan fraudulence, as well as 12 other people including Park Gun-bae on suspicions of misappropriations.

The criminals of the public fund revealed since the establishment of the common search unit in December 2001 increased to 109 persons (48 arrested, 58 unarrested and 8 under investigation) and the public fund collected so far also soared to 39,898,000 won, according to a report by the interim investigation result of the Prosecution Office.

The total amount of fraudulent loans affiliated with Tonga Construction, Daenong and Haetae tapped more than 390 billion won with bad assets held by the financial institutions, caused by bankruptcies of those companies, skyrocketed up to 5.1 trillion won.

It is confirmed that former Chairman Ko and former Vice Chairman Yoo young-chul accumulated secret money of 3.8 billion won from the company’s funds and contributed 700 million won to 60 politicians including former or current assemblymen.

The Prosecution also charged the guilty with 3 million won fines and additional collection of 10 million won, to former Assemblyman Chung Young-hun, former Head of the National Information Board Lee Jong-chan and former Free Democrat Assemblyman Kim Sun-gil who didn’t undertake legal procedures such as the issuance of receipts. The investigation made out such result that former Chairman Ko gave some money to Democrat Assemblyman Kang Bong-gyun amounting to 50 million won, another 20 politicians 10 million won each and 40 people 2 to 5 million won respectively.

The decision of no suspicion, however, made by the Prosecution may leave some controversy on belated reports of political funds to the National Election Commission after disclosure to Donga. For instance, part of the money receivers returned it to Tonga Construction right after the case broke.

The Prosecution also accused without physical detention former President Lee Chang-bok of Tonga Construction, of delivery of 400 million won to a contractor named Yoo Chang-jo for the purpose of soothing tax searches by the National Taxation Office.

Mr. Park, former chairman of Daenong, and Han Jin-yoo, former president of Midopa were put under arrest, on charges of misappropriation that the loss of 137 billion won occurred to the company because of downsized valuation of stocks bought to protect Midopa from a hostile M&A attempt in January to April 1994.

Former Chairman Park and others are additionally accused of loan fraudulence amounting to 160 billion won by means of illegal accounting such as ballooning inventory value and overstating sales amounts.

The Prosecution unveiled the facts that former Chairman Park of Haetae Group, former president of Haetae Confectionary, former president of Haetae Industry and former president of Inkel took part in loan fraudulence in 230 billion won and overpayment of construction expenses.

The above Office is now expanding its investigation under the exit sanction on more than 50 people including former presidents of 10 insolvent companies and employees of faltering financial institutions, who brought about the injection of public funds.

Wi-Yong Jung Sang-Rok Lee viyonz@donga.com myzodan@donga.com