Tracking 350 Million Won of Rail Foundation Money

As the prosecution’s investigation into the alleged investment of the Korea National Railroad—currently the Korea Railroad (Korail)--in an oil field development in Sakhalin, Russia, begins in earnest, Korail is planning to liquidate the Rail Development Foundation (RDF, Director General: Wang Young-yong), whose financial status was aggravated by Korail’s unreasonably pushing forward the business.

According to a report on the “Status of Sakhalin Oil Field Project,” which was submitted to the National Assembly on April 17, Korail announced, “We are considering and speeding up the plan for normalizing the foundation to perform liabilities, and then liquidating the foundation at the same time while repaying our debts to Woori Bank.”

The RDF was founded as a non-profit corporation with a donation of about 5.9 billion won last January in order to raise funds for Korail’s businesses and welfare. The director general of RDF is Wang Young-yong, the head of development headquarters at Korail, and RDF is carrying out businesses, including running a cultural hall in Seoul Station, and tourism by Korea Train Express (KTX).

Meanwhile, the Seoul District Central Prosecutor’s Office’s Special Investigation Department III, which is in charge of this case, will complete its analysis of data from the Board of Audit and Inspection (BAI) and take steps toward a serious investigation this week, summoning those involved.

In particular, the prosecution will be on the track of 350 million won which the RDF was supposed to invest in Korea Crude Oil (KCO), a company in exclusive charge of the project, with Jeon Dae-weol, president of Highend, a real estate developer, and geologist Heo Mun-seok, in order to guarantee a 35 percent stake of KCO.

KCO was founded with capital of one billion won when Jeon paid one billion won lent from private money lenders and then withdrew to repay just after corporate registration, a technique called “camouflaged payment of shares.”

Korail made public that it did not even spend a penny in its account, despite 35 percent participation through the RDF; the BAI confirmed its remark.

However, the prosecution is planning to investigate whether the money invested was merely in documents as the BAI ascertained, or was paid by the RDF but disappeared without an injection into the KCO.

woogija@donga.com