Auditors demand sacking of energy envoy

By Korea Herald
  • Published : Jan 26, 2012 - 19:54
  • Updated : Jan 26, 2012 - 20:57

Prosecution raids office of CNK International over stock scandal

The state watchdog on Thursday demanded the Foreign Ministry sack Kim Eun-seok, the ministry’s ambassador for energy and resources, for his role in pumping up the stock price of CNK International in 2010 by releasing an exaggerated press release.

The Board of Audit and Inspection said its council of commissioners held a meeting earlier in the morning and decided to punish Kim and other government officials who engaged in insider trading of CNK stocks.

The BAI has been probing Kim on suspicions that he helped drive up the stock price of CNK International, a mineral development company that won diamond mining rights in Cameroon in December 2010. 
An investigator from the prosecutor’s office enters the head office of CNK International in Seoul on Thursday to search for evidence of insider stock trading in connection with the Cameroon diamond mining scandal. (Park Hae-mook/The Korea Herald)

Kim led the 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 watchdog.

At the time, the ministry had said that the estimate was based on 1995-1997 research by UNDP and 2007 research by Chungnam National University.

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

Although Kim knew that the actual reserves were one seventeenth of the initial estimate, he still led the Foreign Ministry to publish the overblown press release, the BAI said.

“In addition to Kim, his two relatives and another two related officials traded CNK stocks, prompting suspicions of special favors and causing public distrust,” the watchdog said in a statement.

“There was no such thing as Chungnam National University’s research.”

However, the Foreign Ministry did not stop there. After news reports questioned the credibility of the estimate in June 2011, the ministry released a second press release saying the government of Cameroon officially recognized the size of the reserves in the diamond mine.

The BAI said Kim’s aide, a former resources and cooperation division head in the Prime Minister’s Office, and an official at the Korea Resources Corp. were also involved in insider trading of CNK stocks.

The board also requested more prudence from the Prime Minister’s Office in supporting the resources development of a private firm.

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 trading in connection with the mining scandal.

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

Oh is suspected of distributing false information on the estimated volume of diamond reserves and raked in 80.3 billion won by driving up the stock price.

Park Young-june, a protg of President Lee Myung-bak who until recently served as vice minister of knowledge economy, is also reportedly implicated 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. 

Immediately after the BAI announcement, foreign ministry spokesman Cho Byung-jae said in a statement that his ministry "humbly accepted" the audit results.

The ministry has relieved Ambassador Kim of his duties and will soon hold a meeting to decide whether to sack him, Cho said.

In a telephone interview with a local news agency, however, Kim insisted on his innocence, saying he "can't accept" the audit results.

By Kim Yoon-mi (