Prosecutors have summoned former Minister for the Prime Minister’s Office Cho Joong-pyo in connection to allegations of stock-rigging at CNK International, on Tuesday.

Cho, who was a deputy minister at the Ministry of Foreign Affairs and Trade before serving in the Prime Minister’s Office, has held an advisory role at CNK since April 2009.

Cho is suspected of having a hand in composing the exaggerated report that the Cameroon mine, the development rights of which were awarded to CNK, held 420 million carats of diamonds, and in the process of preparing the Foreign Ministry’s press release about the information.

The former bureaucrat also converted 250,000 warrant bonds held by himself and his family members into shares shortly before the Ministry of Foreign Affairs’ press release in December 2010. 

On Dec. 16, 2010, Cameroon offered the right to C&K Mining, the parent company of CNK, to develop the diamond mine in Yokadouma in southeastern Cameroon.

With the deal presenting significant economic gains for Korea, and as the development was congruent to the government’s so-called “resources diplomacy,” government officials are thought to have helped the firm win the deal.

The day after the deal was sealed the Foreign Ministry announced the developments in a press release.

Following the announcement, CNK stock price went from about 3,000 won to 16,100 won in less than one month. Preliminary investigations by the financial authorities gave rise to suspicions that CNK officials exaggerated the amount of diamonds buried in the mine apparently to manipulate stock prices.

Cho is one of the four individuals considered to be at the center of the suspected stock-rigging scam. The other three individuals are CNK CEO Oh Deok-gyun, former energy and resources ambassador Kim Eun-seok and former vice minister of the Prime Minister’s Office Park Young-joon.

In connection to the allegations, Kim has been questioned by the prosecutors’ office on two occasions while Oh has remained in Cameroon.

In questioning Cho, the investigators are reported to be focusing on clarifying his involvement in drawing up the report, and whether he influenced Foreign Ministry officials to make the announcement.

Investigators will also determine whether Cho took part in the stock-rigging scam with the knowledge that the diamond reserve estimate was exaggerated, and the reasons for converting warrant bonds to shares.

By Choi He-suk
(cheesuk@heraldcorp.com)