Shinhan’s big three pressed to resign

By Kang Seung-woo

Shinhan Financial Group’ s top three executives are expected to face a forced exit from the group’s management, after its Korean-Japanese shareholders agreed to dismiss them for the recent internal feud and legal disputes.

A total of 130 shareholders, including the group’s four outside directors, held a meeting in Osaka, Thursday and reached an agreement to sack all three and select new management as soon as possible to put the group back on track.

“The three chief executives should resign, bearing responsibility for the damage caused by a series of scandals involving them,” they said in a statement.

Group Chairman Ra Eung-chan is expected to receive a heavy penalty for violating the Real Name Financial Transaction Law, while President Shin Sang-hoon has been suspended from his duties for alleged embezzlement and breach of trust. Shinhan Bank CEO Lee Baek-soon is also involved in a legal dispute for defamation.

Meanwhile, Shin will be summoned next week by the prosecution.

The Seoul Central Prosecutors’ Office said Thursday that it will question the 62-year-old president of the nation’s second-largest financial group over allegations of breach of trust and embezzlement.

Along with Shin, two chief executives from Geumgangsan Land and its subsidiary company the Tomorrow Group, who were recipients of alleged illegal loans from Shin, will also be called in, alongside five former and current executives of Shinhan Bank.

“We will question Shin and others intensively next week,” an official at the prosecutors’ office said. “We will be able to find who is lying.’’

Shinhan Bank, the group’s flagship unit, lodged a complaint with the prosecution last month, accusing Shin of illegally extending 43.8 billion won ($39.16 million) in loans to Geumgangsan Land and the Tomorrow Group while he was in charge of the lender between 2003 and 2009.

Shinhan claimed that one of Shin’s relatives was the head of Geumgangsan.

Shin was suspended from his duties at Shinhan Financial in a board meeting on Sept. 14.

A native of Gunsan, North Jeolla Province, Shin is also suspected of embezzling 1.5 billion won in advisory fees, which should have been paid to honorary group Chairman Lee Hee-kun.

A team of investigators raided the two leisure companies in northern Gyeonggi Province late September and confiscated accounting books to trace the money flow regarding the case, according to the prosecution.

In what is seen as an internal power struggle between Shinhan Financial’s kingpins, Chairman Ra and Shinhan Bank CEO Lee are also facing legal problems.

Last month, a group of civic organizations filed a complaint against Ra, 71, on charges of masterminding irregular financial transactions.

In April 2007, Ra, who has headed the financial services firm since 2001, allegedly wired 5 billion won to now-jailed businessman Park Yeon-cha, head of shoe-making company Taekwang, through several bank accounts opened in other people’s names.

He admitted to holding such “borrowed name” accounts but denied having broken the financial transaction law, Monday.

To make Ra’s situation worse, the Financial Supervisory Service (FSS) has decided to impose a heavy penalty on him, finding the allegation credible.

Meanwhile, Lee, 58, was sued for defamation and violation of the Banking Law by the Tomorrow Group.

Watchers predict that the prosecution will investigate Ra and Lee after finishing with Shin.