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Coal Corp. Invested W41.8 Bln in Bankrupt Firm

Posted March. 27, 2008 08:13,   


Investing in bankrupt companies. Rigging scores for new recruits. Playing golf with company money.

The Board of Audit and Inspection yesterday said public companies are guilty of a number of offenses, such as the ones mentioned above.

The public sector watchdog ended its preliminary investigation into 31 public corporations that began on March 10 and started audits Monday.

Korea Coal Corporation is found to have made up false papers to collect 180 billion won to invest in an insolvent construction company. Korea Securities Depository unfairly eliminated five applicants by fixing written test and interview scores.

The board has asked prosecutors to probe ten figures in the scandal, including the presidents of the coal company and the securities depository.

The government will classify public corporations for consolidation and privatization, according to the audit results.

▽ Buying commercial papers of a bankrupt company

Between April to May last year, the coal company changed the purpose of 41.8 billion won loaned for facility investment and spent the money on purchasing commercial papers of a bankrupt builder.

When the commercial bills were stopped from circulating, the firm feared losing its entire investment. So it made up false documents asking for 110 billion won for midterm settlement of retirement grants. The company then issued corporate bonds.

On 31 occasions between June and November last year, the company borrowed 180 billion won at low interest to prevent the builder from going belly up.

Over that time, the firm did not secure security on the loan and now might not be able to collect the remaining 110 billion won in outstanding loans from the builder.

Prosecutors will investigate four persons, including the president of Korea Coal Corporation, for malfeasance.

▽ Applicant score manipulation

Jobs in public corporations, dubbed dream jobs, are sought after by hundreds of thousands of people every year. Yet the firms are known to have rigged scores in employment exams.

During its final hiring in the latter half of last year, Korea Securities Depository manipulated score sheets for director interviews 23 times. This eliminated five candidates who were likely to be hired and resulted in the hiring of five long-shot applicants.

Written tests were also fixed to disqualify 11 jobseekers and pass 14 others to the next stage.

Six people involved including the depository’s CEO face probe.

▽ Free golf on weekdays

A public finance company collected yearly dues from 60 accounts for promoting friendly relations with clients.

KDB Capital, the leasing arm of the state-run Korea Development Bank, opened accounts under borrowed names of its employees and collected yearly dues between 300,000 and one million won a month into those accounts from some 60 companies who took out a lease or a loan.

The amount collected as of this month was 120 million won, with 70 million spent and only 50 million won remaining.

Using this money, directors of KDB Capital played golf two to three times a year with company presidents from 2005.

Internal inspections also found that from Friday morning through Saturday afternoon, five directors of KDB Capital and 17 company presidents played golf on Jeju Island using the dues.