By Choi Kyong-ae
KT may have to cover the financial losses incurred by a scam involving an employee of its subsidiary KT ENS, a financial regulator told The Korea Times, Monday.
“If a court rules that KT ENS should compensate lenders, KT may have to raise cash by issuing new shares of KT ENS,” said Park Young-kyu, head of the Financial Supervisory Service’s (FSS) Mutual Savings Bank Examination Department.
KT ENS, which used to sell mobile phones to customers for KT until 2012, fell into trouble last week when the FSS found out that a KT ENS employee took out at least 300 billion won ($280 million) from financial firms in fraudulent loans.
But the borrowings over the past seven years were not based on real transactions of mobile phones, because KT ENS quit selling handsets for the country’s second-biggest mobile carrier two years ago, KT ENS spokesman Kim Ki-han said by telephone.
KT ENS and the financial companies involved are blaming each other for the situation.
The FSS official said some KT ENS employees may have colluded to deceive bank loan officers. “They used to come down to the lobby of KT ENS whenever the bank officers visited them to allow them to stamp the company’s seal on the documents needed to get a loan,” he said.
However, KT ENS flatly denied the allegations saying the company has never approved such loan applications in the past.
A KT official said the financial companies bear some responsibility for what happened, “because they failed to figure out the fraud taking place over such a long period of time. Hana Bank even extended loans worth more than 160 billion won to the employee.
“One thing is clear. Financial institutions should fix their monitoring system as early as possible in order not to make similar mistakes again in the future,” said the official at the country’s biggest fixed-line operator.
KT ENS, which was known as KT Networks until August, currently builds networks and cables for mobile communications. The company, established in 1986, posted 500.6 billion won in sales last year.
The 51-year-old employee who worked for KT ENS for more than 10 years was arrested last week on fraudulent-loan charges and an investigation into the case by the FSS and prosecutors is underway.
Other major lenders include NH NongHyup Bank, which extended 19 billion won, and KB Kookmin Bank, that extended 30 billion won, according to the FSS. The loans were guaranteed by other financial institutions, such as brokerage firms including Korea Investment & Securities.
Hana Bank which represents the lenders said last week it will file a lawsuit with a local court.