The state watchdog on Thursday reportedly demanded the Foreign Ministry slap a “heavy penalty” on Kim Eun-seok, the ministry’s ambassador for energy and resources, who is suspected of involvement in pumping up the stock prices of CNK International in 2010.

The Board of Audit and Inspection’s council of commissioners held a meeting earlier in the morning and decided to demand punishments for eight officials including Kim, a local media outlet said, prior to the watchdog’s announcement of investigation results.

“As soon as we receive the investigation results from the BAI, we will take immediate action. There will be no tolerance of corruption and illegality,” Foreign Ministry spokesperson Cho Byung-jae said.

“The heavy penalty could include dismissal.”

The BAI has been probing Kim on suspicion that he helped drive up the stock prices of CNK International, a mineral development company which won the diamond mining rights in Cameroon in December 2010.

Kim led the Foreign Ministry to publish a press release on Dec. 17, 2010 in which the size of the diamond reserves in a mine in Yokadouma was exaggerated to 420 million carats, according to the prosecution and the financial authorities.

At the time, the ministry said that the 420 million carats of the diamond reserves, in which CNK’s subsidiary C&K Mining had mining rights, were based on UNDP’s 1995-1997 research and Chungnam National University’s 2007 research.

After the press release, the company’s stock price shot up to 16,100 won ($14.4) per share from about 3,000 won prior to winning the bid within 16 trading days.

The ministry deleted the press release from its website just Thursday, which prompted more suspicions.

“The ministry ‘temporarily’ deleted the press release until the BAI announces the investigation results,” Cho said.

Kim’s younger brother and sister-in-law are also under investigation for allegedly purchasing large amounts of CNK stocks, prior to the announcement of the bid winning.

Earlier in the day, prosecutors raided the head office of CNK International in central Seoul and homes of CNK International head Oh Deok-gyun and Cho Joong-pyo, formerly a vice foreign minister and minister in the Prime Minister’s Office, to investigate their alleged involvement in insider stock trading in connection with the Cameroon diamond mining scandal.

According to the prosecution, Cho provided exaggerated data about the size of the diamond reserves for the Foreign Ministry in July 2010, via Oh.

Oh is suspected of distributing false information on the estimated volume of diamond reserves and raking in 80.3 billion won by driving up the stock price and selling them. Oh later knew that the estimated reserves were only 25 million carats, 6 percent of the initial estimate, in 2009 after a field inspection, but intentionally provided an exaggerated figure to the Foreign Ministry, news reports said.

Park Young-june, a protégé of President Lee Myung-bak who until recently served as vice minister of knowledge economy, is also reportedly involved in the scandal.

News reports said Park visited Cameroon as a vice minister at the Prime Minister’s Office in June 2010 to help CNK win the diamond mining bid. 


By Kim Yoon-mi
(yoonmi@heraldcorp.com)