Scandal sets Woori Bank back
By Kim Jae-won
A slew of corruption scandals are beginning to engulf the Lee Myung-bak government and Woori Bank is uneasy as its name continues to be mentioned in the mess.
Financial regulators have already investigated the state-owned bank, the country’s second-largest lender in size of assets, over its failure to report a 20 billion won withdrawal from arrested Mirae Savings Bank Chairman Kim Chan-kyung earlier this month. Kim, who was charged for embezzling more than 100 billion won in corporate funds, took the money and attempted to flee the country in a fishing boat as regulators moved to suspend the secondary lender due to its poor finances.
As bad as it is to be linked to the disgraced Mirae chairman, this is hardly the biggest issue in Woori’s list of worries. The bank is also connected to an explosive bribery case that features the President himself, his mentor and former right-hand man and a number of property developers involved in a massive shopping mall project in southern Seoul.
Former Korea Communications Commission (KCC) Chairman Choi See-joong, considered the second-most powerful man in the country for much of the Lee administration, and former Knowledge Economy Vice Minister Park Young-joon, have been arrested for receiving bribes from businessmen tied to the Picity project in 2005. Lee was Seoul Mayor at the time.
The involvement of Woori in all of this seems to go deep. Former Picity CEO Lee Jung-bae accused Woori of allowing the company to go bankrupt, washing its hands of the project after coming in as one a major financial backer.
The Picity CEO seems to have plenty of reasons to be frustrated about Woori’s level of commitment. According to police officials, he used billions of won to bribe two high-ranked Woori executives, identified only as Cheon and Jeong, who were in positions to approve loans.
A Woori spokesman came clean about the accusations the bank is facing over the Picity project. Both Cheon and Jeong have been fired and the company is fully cooperating with law enforcement authorities, he said.
Woori’s connection with Mirae’s Kim is also a disturbing story, but in a more pathetic way. Mirae is one of 20 savings banks suspended by the Financial Supervisory Service (FSS) since last year as it moves to purge the secondary banking sector that has been exposed to the country’s toxic real estate and construction sectors. The suspensions of Mirae and three other lenders, including market leader Solomon, came earlier this month.
FSS officials have questioned why Woori failed to report Kim’s withdrawal when the bank’s branches are required to inform the company’s main office of any withdrawal that exceeds 300 million won. This fuels suspicions of a murky connection between Woori executives and Kim.
``Our investigators are examining the case now. We will punish officials if they prove to be involved with wrongdoings,” said FSS director Cho Seong-yeol.
Woori officials say that the failure to report Kim’s withdrawal was an honest mistake. The rumors that the manager at the bank’s branch in Seochodong, southern Seoul, was close to Kim are unfounded, they say.
``The electronic system was designed to detect cash withdrawals. Since Kim took out some of the money in checks, the system failed to catch it. We fixed this problem immediately,’’ said a Woori official.
Industry observers say that the wealth of accusations facing Woori proves that the bank has become more vulnerable to political influences and bad management due to the long period in limbo regarding its ownership status.
Woori Financial was rescued by taxpayers in the fallout of the late-1990s financial crisis, and the government has since struggled to divest its 57 percent stake in it.
Financial regulators recently announced they are preparing a third attempt at selling Woori, after failing in 2010 and last year due to lack of investor interest. The chances for the deal seem as dismal as ever due to uncertainties facing the economy from inside and out.