Govt. Officials, Insider Trading on Start-up Company Shares

Some officials at the government credit guarantee fund and tax offices were found to have bought start up companies’ stocks at low prices and sold them, to reap huge profits.

The Board of Audit and Inspection on Sunday said that after its inspection of irregularities regarding public officials’ acquiring start-up company stocks, it found that 35 public officials were engaged in irregularities and that it asked for the prosecution’s investigation on three of the officials. For the remaining 32 officials, the Board informed government offices the results of its inspection and asked the offices to take disciplinary measures against them.

According to the Board of Audit and Inspection, when a "W" company received a guarantee of credit of 630 million won from the Korea Credit Guarantee Fund, a person identified by the family name Jeong, who dealt with the credit guarantee, got tips about the listing of “W” company on KOSDAQ. He bought the shares at a bargain and earned 80 million won after selling them off.

Two tax officials earned 16 million won and 7.4 million won respectively after urging their housewives to buy shares of companies they audited, the audit-inspection agency said.

In addition, the inspection results show that in August of 2000 a senior official at the Small and Medium Industry Promotion Corporation was appointed outside director of "H" company, which he had come to learn about when he had assessed start-ups, and since then has earned 13.88 million won from trading.

Seung-Ryun Kim srkim@donga.com