34 Including Former Jinro Chairman Prosecuted for Illegal Use of Public Funds

Special Investigation Bureau for public fund irregularities reported on September 29 that it has found 34 owners and employees of 7 insolvent companies for charges of illegally receiving loans worth hundreds of billions of won through window dressing or of having unfairly assisted insolvent affiliates, and that it has arrested and prosecuted 18 of them, including Jang Jin-ho, chairman of Jinro Group, and Um Sang-ho, chairman of Kunyoung Group.

Other company owners who have been arrested include former Kapeul Group chairman Park Chang-ho, Daesan Construction president Choi Jin-kang and director Oh Jin-sup, former Yeollin Geumgo representative Sohn Sung-ho, and former chairman of Dongshin Inc. Roh Jin-kak and vice-chairman Kin Chang-hun.

In addition, the prosecution indicted 16 people, including former Kohap Group chairman Jang Chi-hyuk, and confiscated 1.8 billion won worth of public fund.

According to the prosecutors, the 7 companies borrowed 1.9171 trillion won by defrauding financial institutions. Also, the total of financial institutions` insolvent debts, as a result of the 7 companies` bankruptcy, amount up to 4.1732 trillion won, and trillions of won had been injected in order to cover the financial institutions` debts.

After the Special Investigation Bureau was established in December 2001, the number of public fund related criminals increased to 145, of which 65 are under arrest, 68 not arrested, 11 wanted and 1 under investigation, and the recovered public fund also rose to 41.888 billion won.

The prosecution is planning to forbid 79 employees of the financial institutions that were involved with 10 insolvent companies, such as S Construction, N Corporation and D Construction, in which public fund had been injected, and with illegal loans from departing the country, and is also planning to conduct investigations on lobbying in the political sector. The chairman of Jinro Group is alleged to have borrowed 550 billion won through fraudulent accounting between 1995 and 1997, and siphoned 6 billion won worth of Junro affiliates` fund for the use of settling money in solving management-related conflicts.

Former chairman of Kohap Group has also allegedly committed window dressing, by exaggerating its inventory between 1995 and 1996, and borrowed 679.4 billion won from financial institutions, made entries on the financial statement as if its affiliate KOHAP Petrochemical Corp. had recorded surplus instead of deficit, giving out 5.4 billion won to his family members in the form of dividends.

Former chairman of Kunyoung Group is charged for exaggerating the profit of 1994~1995, borrowing 100 billion won, and for unfairly assisting its affiliates with 103 billion won. Furthermore, Cho Wang-je, former legal officer of Kunyoung Inc., turned out to have created 500 million worth of secret money and have presented 300 million won to the head of Housing Redevelopment Association.

Former chairman of Kapeul Group was proved to have borrowed 550 billion won by cheating on financial institutions. In addition, former representative of Dongshin Group is on the charge of borrowing 9.2 billion won from Yeollin Geumgo, by scouting former Yeollin Geumgo representative Sohn to Dongshin, receiving discounts for accommodation bills under the name of a paper company, and then announcing the paper company to have gone bankrupt.

Jin-Young Hwang buddy@donga.com