FSS, Shinhan audited over alleged giving favors to builder

By Kim Jae-won

The state auditor recently inspected the Financial Supervisory Service (FSS) and Shinhan Bank over allegations that they granted special favors to a construction company, officials said Thursday.

They were suspected of giving favors to the company because it was controlled by a lawmaker from the ruling Saenuri Party, according to the Board of Audit and Inspection (BAI).

The BAI examined whether Shinhan, the main creditor of Keangnam Enterprises, helped the mid-sized builder be put under a debt workout program in October 2013 under pressure from Keangnam’s major shareholder Sung Woan-jong who was a Saenuri Party lawmaker at that time.

Keangnam avoided being put under court receivership because the bank approved the debt restructuring program.

The state auditor also inspected the FSS over whether the financial watchdog supervised the process transparently.

The FSS and Shinhan confirmed the BAI’s inspection, but denied that they committed any wrongdoings.

FSS spokesman Chung Seong-woong said, “A BAI inspection team has recently wrapped up its audit. I know the audit found the allegations involving FSS were baseless.”

Shinhan spokesman Shin Dong-heon also said that the bank provided the workout program to Keangnam after a thorough review of the company’s financial status and other conditions in a transparent manner.

Market watchers said the BAI suspected Sung influenced the FSS and Shinhan to give favors to the company which asked for a debt workout program even though it had graduated from two similar programs.

They say Keangnam is an exceptional case to have financial support from creditors three times.

Most of its competitors in similar situations, such as LIG Engineering & Construction, Dongyang Engineering & Construction and the now-defunct Limkwang Engineering & Construction, had to file for court receivership because creditors declined to approve workout programs for them.

Bank officials also said it was unusual that Keangnam was not forced to write down its equity capital as a condition for the debt restructuring program and Sung still controls the company despite the fall of his stake in the company to 9.5 percent from 21.5 percent after the program.