The prosecution has indicted two former managers of KB Kookmin Bank’s Tokyo branch for extending illegal loans worth 400 billion won ($379 million), officials said Sunday.
The prosecutors are further investigating whether the two suspects, identified by the surnames Lee and Ahn, received kickbacks from the borrowers and used them to create a slush fund at home.
They were arrested earlier this month on charges of breach of trust. Lee, former branch chief, and Ahn, former deputy chief, were found to have issued the illegal loans to unqualified businessmen from 2007 to this year by fabricating documents and using the same building as security for multiple loans. Prosecutors also indicted a 52-year-old borrower surnamed Hong without detention for handing rebates of about 100 million won to the officials in return for unlawful loans, and his employee surnamed Oh for smuggling 160 million yen ($1.5 million) into Korea without approval by foreign exchange authorities.
Some of the money was allegedly delivered to the two former Tokyo branch officials.
Lee and Ahn are said to have ordered an employee in the loan department to fake the amount on loan contracts.
They also split the loans to avoid the bank’s mandatory procedure of review for loan requests that exceeded a certain amount.
The Financial Supervisory Service in September discovered an inappropriate issuance of loans conducted by the Tokyo branch mangers during the former Lee Myung-bak administration, and handed the case over to the prosecution.
Prosecutors are looking into the possibility that the kickbacks may have been handed to the Seoul headquarters to create a secret fund when KB Financial Group was chaired by Euh Yoon-dae, a close confidant of former President Lee.
A 38-year-old employee of the Tokyo branch reportedly committed suicide on Dec. 16 during the probe on the branch. Whether he was connected to the alleged crime has not been verified yet.
Meanwhile, KB Kookmin Bank’s Beijing branch has been under fire for frequent personnel changes without following the general guidelines set by Korean regulators.
The FSS advised the No. 2 lender last month to guarantee the branch executives’ terms after receiving complaints from the China Banking Regulatory Commission over the frequent personnel replacements. The bank, however, again switched the branch chief and vice-chief four days after the FSS’ request.
The Chinese financial regulator has not approved the new personal replacement, leaving three of the Beijing branch’s officials in limbo. KB Kookmin Bank CEO Lee Kun-ho is expected to visit China to resolve the issues with Chinese officials.
By Lee Hyun-jeong (firstname.lastname@example.org