KTCU Blamed of Using Undisclosed Information

There have been accusations stating that the Korea Teachers Credit Union (KTCU) acted on insider information, when it invested in Y Company, whose owner Y played golf with Prime Minister Lee Hae-chan on Independence Movement Day.

KTCU is also accused of buying more Y Company stocks, when several employees of KTCU advised against it.

Assemblyman of the National Policy Committee Kwon Young-se (Grand National Party) made these accusations after reviewing investment analysis reports from KTCU and demanded an explanation on Thursday.

According to the papers that Kwon presented, the investment division of KTCU added Y Company on to the list of “Companies Worth Investing In during the Second Quarter of 2005,” citing that its value will increase. It had concluded that Y Company was to profit from a 2,500-pyeong piece of land located in Daeyeon-dong, Busan. It had forecasted that when the purpose of the land is switched from residential to commercial, the actual price of land would increase from 6 billion won (2.4 million won per pyeong) to 25 billion won (10 million won per pyeong), rewarding Y Company 19 billion won of revaluation profit.

Y Company had filed a written opinion requesting the change in the purpose of its property to Busan Metropolitan City on September 30, four months after KTCU prepared the report. The request is not information released to the public.

Assemblyman Kwon’s side says that KTCU should be under suspicion of illegally acting on unreleased information, because it seemed to anticipate that Y Company would file such a request.

An investment analysis report for the period between July 28 and August 31, 2005 clearly states that it should withhold from buying and wait and see, because a fall in the stock price is expected.

KTCU neglected the report, and bought 297,140 more stocks on August 2, 3, 4, and 5. The stock price fell sharply during this time.

Assemblyman Kwon said that the government should discern if KTCU bought Y Company stocks with an agenda of its own, and if it tried to keep the stock price high.

KTCU denied such allegations by issuing an explanation, saying that it knew that Y Company owned real estate through an electronic public announcement posted on the Financial Supervisory Service’s website at the time of its investment and that they had found out about the change in purpose of the land through research.

Busan Metropolitan City also replied that Y Company had previously filed a written opinion in March, and that it had filed the written opinion again in September, when their request was denied. Assemblyman Kwon’s side said that this does not explain why KTCU continued buying Y Company stocks after the request filed in September was denied on September 21.

Kim Pyeong-soo, chairman of KTCU, in an interview with broadcast stations said that Lee Ki-woo, vice minister of Education and Human Resources Development helped the union when it had trouble solving tax related problems and that he usually gives advice when there are other problems.

Kim, however, did not elaborate on what the tax problem was and how Vice Minister Lee helped out.

Jung-Eun Lee Jae-Myoung Lee lightee@donga.com egija@donga.com