$920 Million in Public Funds Wasted

Over one trillion Korean won (approximately $855 million as of May 27) has been wasted due to loose management at government investment institutes and unethical management at financial organizations which received government funding.

Between June and October of 2003, the Board of Audit and Inspection (BoAI) performed an audit of “actual facts in government funds management” on bodies such as the Ministry of Finance and Economy, the Financial Supervisory Service, the Financial Supervisory Commission, Korea Deposit Insurance Corporation (KDIC), Korea Asset Management Corporation (KAMCO) and 12 banks which received government funding from these organizations, including Woori Bank. On May 27, the BoAI announced that a total amount of $ 920 million had been mismanaged.

The BoAI stated in the announcement of the audit results today, “$703 million had been wasted due to slack operations at KAMCO and KDIC,” and also, “Due to unethical management, an additional infusion of $198 million had been made on eight financial institutions which had already received government funding.” Audit results show that some financial institutions had even raised its employee’s salaries by 135 percent.

It has been revealed that KAMCO had overpaid foreign investment companies $62 million in management fees during the liquidation of insolvent bonds, caused primarily by the lack inspection of related regulations.

The BoAI identified out of the $23.7 billion invested and $32 billion retrieved between April 2001 and June 2003, $102 million of excessive reduction of liabilities of insolvent companies, $108 million of losses caused by loose management of public funds collection regulations, $62 million of overpayment to foreign investment companies, and $32 million of losses caused by under priced liquidation of insolvent bonds.

The BoAI also stated that it is in the process of collecting the $108.8 million of concealed private assets from the insolvent financial institutions that had received government funding.

The BoAI revealed 37 violations at KDIC, 25 at KAMCO, 11 at the Financial Supervisory Service, four at the Financial Supervisory Commission, and reprimanded three, reassigned five, and is investigating or reporting six cases to the authorities.

Young-Hae Choi Ki-Jeong Ko yhchoi65@donga.com koh@donga.com