Execs Grilled Over Exchange Bank Sale

The Board of Audit and Inspection (BAI) summoned three officials, including Deputy Minister of Finance and Economy and former director of the Finance Supervisory Commission (FSC) Kim Seok-dong yesterday as part of its ongoing investigation into the suspicious takeover of the Korea Exchange Bank (KEB) at a fire-sale price by the U.S. equity firm Lone Star.

The BAI summoned Kim, Lee Gang-won, head of the Korea Investment Corporation and then president of KEB, and Byun Yang-ho, head of the Bogo Fund and former director of the financial policy division at FSC, and questioned them about Lone Star’s qualifications and about allegations that KEB’s capital ratio was manipulated in order to facilitate approval for the takeover.

The three officials arrived at the BAI office 10 minutes apart starting at 1:00 p.m. yesterday. Kim arrived first and fielded questions separately from three or four inspectors.

The board asked Lee for details of a report submitted to the government stating the KEB’s capital ratio might fall to 6.16 percent and about KEB former officials receiving a large retirement bonus.

The board asked Kim and Byun about applying exceptions and approving the takeover of the KEB to a private equity fund that lacked qualifications. Kim and Byun were in charge of practical matters of the sale at the FSC and the MOFE, respectively.

The board plans to summon other former working-level officials of the FSC and officials staying abroad. If their statements contradict each other, it will summon them again and cross-examine them.

The results of the investigation will be published around April 20.

Min-Hyuk Park mhpark@donga.com