Investigators seek to stamp out corruption to protect small-sum depositors
Prosecutors are investigating possible corruption at regional agricultural cooperatives, turning their focus away from local savings banks amid concerns that co-op irregularities could impact the livelihoods of citizens.
Investigators recently discovered that a cooperative in Gwacheon, Gyeonggi Province raked in tidy sums after it illicitly raised its interest rates without consent from borrowers, sources at the Supreme Prosecutors’ Office said.
The cooperative took some 4.7 billion won ($4.2 million) in additional profits after it raised its lending rates when it was supposed to cut them in accordance with the central bank’s decision to lower lending rates in 2009.
Some 700 farmers holding 1,200 bank accounts at the cooperative were affected by the hike in the interest rates, prosecutors said.
Investigators sought arrest warrants for seven executives at the cooperative, and have so far secured warrants for three of them including its head and chief financial officer.
On Oct. 18, prosecution staff raided the cooperative’s headquarters and confiscated financial documents for evidence. They are now trying to find out if there were other irregularities or if any other staff were involved in wrongdoing.
Prosecutors are reportedly investigating other cooperatives as well, on anonymous tips that they were involved in lending irregularities.
Such prosecutorial moves appear to be aimed at quickly eliminating any corrupt practices at the agricultural cooperatives that have served as a key financial channel for farmers and citizens.
The number of agricultural cooperatives across the country is 1,167, according to the prosecution. The total number including their local branches amounts to 4,426. They have loaned their clients about 142.2 trillion won.
“It is a very malicious criminal act for banks to illicitly rake in profits from ordinary citizens. We will take stern measures as we believe that there will be more similar cases involving such irregular lending practices,” a prosecutorial official said, declining to be named.
Prosecutors also believe that raising the interest rates in defiance of the central bank’s decision could serve as an obstacle for the government in effectively carrying out financial policies.
Observers say that the Gwacheon cooperative could be just the “tip of the iceberg” as regional agricultural cooperatives were not under the supervision of the state financial watchdog.
The Financial Supervisory Service has overseen the National Agricultural Cooperative Federation, the central body for the country’s agricultural cooperatives. But regional cooperatives have been under the oversight of the Agriculture Ministry.
Investigators suspect that the cooperatives could have committed other financial irregularities while they were excluded from the financial watchdog’s supervision.
In May, prosecutors indicted eight senior officials from a cooperative in Changwon, South Gyeongsang Province. They were charged with intentionally overestimating a client’s collateral to lend him a larger amount of money than they were entitled to.
By Song Sang-ho (email@example.com