Gov’t Internal Watchdog Catches Public Sector Fraud

The Board of Audit and Inspection said yesterday that staff at Korea Export Insurance Corp. used company credit cards to go to massage parlors and bars.

Employees at the state-run firm also earned hundreds of millions of won through inside information acquired through dealing with export guarantee issues and buying undisclosed shares.

The internal government watchdog said 189 employees used company credit cards 1,825 times to pay for personal entertainment amounting to 176.6 million won from 2004.

One employee even used the company card a whopping 189 times to cover 33.64 million won used over 28 months. Instead of repaying the money in cash, he used the organization’s budget to cover it.

For example, he invited his friend for drinks and paid 330,000 won with the company credit card at a bar in southern Seoul in October 2005. Later, the staff member wrote a phony document saying he spent the money to nurture the system of export insurance.

An investigator said, “Company credit cards should be used only when workers properly spend the budget. Organizations should issue a limited number of such cards and strictly supervise their use.”

“The corporation, however, gave company credit cards to one out of every 2.4 employees and failed to prevent them from paying with company credit cards first and repaying in cash later.”

A regional director of the corporation also bought 5,000 undisclosed shares of an electrical firm in Pyeongtaek, Gyeonggi Province, at 10,000 won per share in his wife’s name.

When the firm was listed on the tech-heavy KOSDAQ market in 2005, he illegally earned 346 million won in profit by selling some of the shares.

Between 2005 and last year, the corporation also paid 584.85 million won to around 300 employees whether they worked overtime or not. Clothing expenses of 385.12 million won went to staff through gift certificates worth 400,000 won each. Even those not needing uniforms were given the subsidy.

The probe also found that Korea Housing Guarantee last year bought 334 clothing coupons for workers worth 500,000 won each for a combined 167 million won without evaluating the demand for clothing expenses.

Korea Housing Finance Corporation was also caught hiring more employees than expected.

jameshuh@donga.com