The former head of a state-owned resources firm appeared before prosecutors Friday to face questioning over alleged malpractice in a money-losing energy development project.

Kim Shin-jong, who headed the state-run Korea Resources Corp. during the President Lee Myung-bak administration, is suspected of purchasing Keangnam Enterprises Inc. stocks at an excessive price that caused a financial loss to the corporation.

Prosecutors are investigating whether Kim received bribery in exchange.

In 2010, KORES suffered a loss of 11.6 billion won ($10.3 million) after buying a 1.5 percent stake in the Ambatovy nickel operation in Madagascar for 35 billion won.

Under the plan by then-President Lee, KORES and a consortium of seven South Korean companies, including Keangnam Enterprises Inc., signed a deal in 2006 to invest a combined 1.9 trillion won in the Madagascar project for a 27.5 percent stake.

Keangnam Enterprises, however, failed to meet the deadline to pay for its stake of 2.75 percent. KORES picked up the tab and paid an additional 17.1 billion won on its behalf in 2008, on the condition that the firm pay it back by mid-2009.

But Keangnam Enterprises fell short once again, with KORES taking over 100 percent of its stake in 2010.

At the time, speculation swirled that former Keangnam Enterprises Chairman Sung Wang-jong pressured the president of KORES to purchase the stake.

"The decisions were made internally without going through any government report or approval," Kim told reporters before entering the Seoul High Prosecutors' Office in southern Seoul, adding that he will sincerely respond to prosecutors' questions.

The deal between Keangnam and KORES is one of several shady transactions surrounding the so-called energy diplomacy pushed by former President Lee. (Yonhap)