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Ex-FSS chief indicted for bank irregularities

Prosecutor Choi (Yonhap News)
Prosecutor Choi (Yonhap News)
Prosecution indicts 76, wraps up probe into Busan Savings Bank scandal


Prosecutors have indicted Kim Jong-chang, a former top financial regulator, for the breach of a public officials’ ethics law, wrapping up its probe into a failed savings bank in Busan.

“A total of 76 have been indicted in connection with our investigation into Busan Mutual Savings Bank, whose financial corruption amounts to 9 trillion won,” Choi Jae-kyung, an official at the Supreme Public Prosecutors’ Office told a press briefing.

Over the past eight months, investigators have questioned nearly 3,300 people, delving into suspected irregularities at the Busan-based lender and its four affiliate banks. It was reported as the largest financial corruption case ever.

Of the 76 who faced indictment, 20 are former and current executives of the Busan bank and its affiliates, including chairman Park Yeon-ho and vice chairman Kim Yang.

A former governor of the Financial Supervisory Service, Kim Jong-chang, is charged with hiding his ownership of an equity stake in a firm which invested in the ailing lender. He transferred his shares to the names of his wife and an acquaintance. Under the public officials’ ethics law excluding a conflict of interests, he should have sold off the equity or put them into a blind trust before taking office as chief supervisor of financial institutions including savings banks.

The FSS is the nation’s top financial regulatory body that examines and supervises savings banks and other financial institutions. Last February, it suspended Busan and other savings banks, citing severe capital shortages.

Investigators said they found no evidence to believe that Kim used his influence to help the ailing bank.

The Busan savings bank group, the largest in the sector with total assets of 9.9 trillion won, was found to have lent illegal loans amounting to about 6 trillion won and committed window-dressing worth 3 trillion won.

On top of these charges, it is accused of running an illegal lobbying scheme targeting influential people in the government, financial industry and political circles in order to escape sanctions from the financial regulator.

Among those bribed are Eun Jin-soo, a former commissioner of the Board of Audit and Inspection; Kim Gwang-soo, chief of the Korea Financial Intelligence Unit; and Seo Gap-won, a former lawmaker of the opposition Democratic Party.

Some of President Lee Myung-bak’s confidants were also accused of being involved. They are Kim Doo-woo, a former senior presidential spokesman and Kim Hae-soo, a former presidential secretary for political affairs.

Prosecutors also indicted Chang In-whan, CEO of KTB Asset Management, on allegations that his firm, which handled the lender’s rights issue, provided false information to investors to embellish the bank’s finances.

Also on Wednesday, the prosecution announced results of its investigations into other savings banks, including Seoul-based Samhwa Mutual Savings Bank, Gwangju-based Bohae Mutual Savings Bank and Jeonju-based Jeonil Mutual Savings Bank.

In the probe of Samhwa, chairman Sin Sam-gil and 24 others have been indicted for financial irregularities and bribery.

In total, 171 have been indicted in connection to the corrupt savings banks. 

By Lee Sun-young (milaya@heraldcorp.com)
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