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Execs Arrested in Hyundai Bribe Probe

Posted April. 15, 2006 03:08,   


Park Sang-bae, the former vice-governor of Korea Development Bank (KDB), and Rhee Sung-kun, CEO of KDB Capital, were detained by prosecutors on Friday, April 14 on charges of receiving bribes from Hyundai Automotive Group after helping the group dispose of the non-performing loans of its affiliates.

This is the second time KDB is facing an investigation regarding matters with the “Hyundai family.” The first was the illicit money transfer to North Korea in 2002.

KDB issued a 400 billion won loan to Hyundai Merchant Marine (HMM) which was suffering from a liquidity crisis in June 2000. At that time, there seemed to be no problem with the loan, but as the cash transfer scandal to North Korea erupted in 2002, KDB was spotlighted at the center of the issue.

HMM, which did not have a sound financial background, was able to receive a huge loan from a state-run bank because the government intervened right before the historical June 15 inter-Korean summit. As someone testified that Cheong Wa Dae pressured for the issuance of the loan during investigations at that time, the scandal swelled.

Consequently, Park was sentenced to two years in prison with three year’s probation. The then KDB governor Lee Keun-young was also found guilty in the loan to HMM. However, both were granted special amnesties in May 2004 on the occasion of Buddha’s Birthday.

Park entered KDB in 1971 and smoothly handled affairs of Kia and Daewoo Motors since the foreign crisis, taking the office of vice-governor in 2001.

He was in fact successful in his duties, but some said that his acquaintance with former senior presidential secretary for economic affairs Lee Ki-ho, a key aide during the Kim Dae-jung administration, boosted him up. Park and Lee are from Gwangju, and both graduated from the same high school and university. Lee was also found to be guilty during the illicit money transfer to North Korea.

Park was found to have played a key role in the loan to HMM and left the bank on April, 2003. He is now detained again, this time for receiving bribe from Hyundai Automotive Group for helping dispose some non-performing loans of the group’s affiliates.

Rhee worked under Park as the chief director for the investment bureau in 2002 when the disposal was taking place, and became CEO of KDB Capital in 2004. He is well acquainted with Kim Dong-hun, former head of a local accounting firm Ahn Kwon & Co., who lobbied for the disposal of non-performing loans after receiving kickbacks from Hyundai.

Sang-Hoon Kim Kyung-Joon Chung sanhkim@donga.com news91@donga.com