The Korea Herald


Ex-FSS chief faces probe in savings bank scandal

By 이선영

Published : June 1, 2011 - 19:58

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The prosecution plans to summon for questioning a former chief of the nation’s financial watchdog in a widening investigation into corruption at Busan Mutual Savings Bank.

Kim Jong-chang, who was until March this year governor of the Financial Supervisory Service, is suspected of exerting his influence to help the lender survive regulatory inspections. 
Kim Jong-chang Kim Jong-chang

The FSS is the nation’s top financial regulatory body that examines and supervises savings banks and other financial institutions. In February, it suspended Busan Mutual Savings Bank and other savings banks, citing severe capital shortage.

“We’re currently considering the appropriate timing of his summons,” an official at the Supreme Prosecutors’ Office, which leads the probe, told Yonhap news agency.

Suspicions that Kim may have been involved in illegal lobbying by the savings bank surfaced after Eun Jin-soo, an arrested former commissioner of the Board of Audit and Inspection, was found to have contacted Kim several times last year while the FSS was conducting a review of the troubled lender.

Eun was formally arrested Monday on charges of receiving 70 million won in bribes from Yoon Yea-seong, an arrested financial broker and lobbyist hired by Busan Savings Bank, who asked Eun to influence financial regulators into easing their inspection and sanctions.

The former BAI official was among the attorneys of President Lee Myung-bak when Lee was embroiled in a stock price-rigging scandal dubbed the BBK case in 2008. Eun served as a chief legal adviser in Lee’s presidential transition team.

Investigators suspect that Eun may have asked Kim behave leniently toward the Busan bank, which had engaged in illegal lending and other financial irregularities totaling about 7 trillion won.

The prosecutors will also look into suspicions over a real estate trust company founded by Kim. The firm spent about 9 billion to buy Busan Mutual Savings Bank shares in June last year. Upon inauguration as FSS chief in March 2008, Kim disposed of all of the company’s shares under his wife’s name.

More than 40 former and current FSS officials have been called in for questioning with regard to the scandal so far.

Among them is Yoo Byung-tae, a former chief of the FSS savings bank inspection bureau who was indicted with detention earlier this week. He is accused of receiving a total of 210 million won in bribes from the Busan savings bank in return for offering information and other favors.

According to prosecutors, the now-suspended bank used slush funds to lobby high-ranking government officials and influential politicians to have financial regulators gloss over its corruption.

The bank raised the illicit funds by offering illegal loans worth trillions of won to more than 100 special purpose companies it has established to invest in real estate and construction projects, the prosecutors said.

The savings bank scandal is turning into a political bombshell, as investigators zero in on senior government officials and politicians who are allegedly lobbied by the bank.

The prosecution plans to summon Park Jong-rok, the bank’s legal adviser who is said to have made phone calls to Kwon Jae-jin, a presidential secretary for civil affairs, when financial trouble was deepening at the Busan lender.

It is also trying to get hold of another broker surnamed Park who is believed to be staying overseas. Park is said to have received billions of won in lobby expenses.
By Lee Sun-young (