Flour Firm Is Insider Trading Suspect

The Financial Supervisory Service (FSS) said yesterday it would begin a full-scale investigation into allegations of illegal trading of Youngnam Flour Mills stock. Chairman Ryu Won-ki, who played golf with former Prime Minister Lee Hae-chan on March 1, owns Youngnam Flour Mills Company.

The flour company is suspected of manipulating stock prices and engaging in insider trading.

“We decided to start a full investigation after looking into various allegations raised against Youngnam Flour Mills,” said Lim Seung-cheol of the FSS. “We plan to investigate securities and bank accounts of people involved in trading the company’s shares, and we intend to summon them for questioning.”

Officials from Youngnam Flour Mills, the Korea Teachers Credit Union (KTCU), and seven financial companies are expected to be summoned. The KTCU has invested heavily in the company’s shares since May of last year, and seven financial companies bought 1.95 million shares on the over-the-counter market last November.

“We are focusing on the company’s announcement of its intention to attract overseas investment. We will investigate whether the company actually went ahead with its plans to attract it,” Lim said.

The prosecution is also expected to investigate seven financial companies that bought 1.95 million shares of Youngnam Flour Mills to find out whether the flour company announced its plans to tap into the bio and animal pharmaceuticals industries just to boost its stock price.

Some experts believe that the FSS has already found a substantial amount of evidence against Youngnam because prosecution head Yoon Jeung-hyun said on March 15 that the FSS would be prudent before starting a full investigation.

Jin-Young Hwang buddy@donga.com