Former Hanjin Shipping chief under investigation for alleged illegal stock trading
By Kim Jae-won
Choi Eun-yeong
Former Hanjin Shipping Chairwoman Choi Eun-yeong and her two daughters are under investigation by the financial regulator over allegations of illegally trading shares in the firm using inside information, the regulator said Monday.
The Financial Services Commission (FSC) said that its investigators will examine the trade activities of Choi, Cho Yoo-kyung and Cho Yoo-hong because they are suspected of using inside information while selling their entire 0.39 percent stake, worth 3.1 billion won, in the shipping company between April 6 and 20.
Hanjin Shipping announced that it will file for bank receivership April 22, and submitted an application for a creditor-led debt restructuring program to the Korea Development Bank, Monday.
“We decided to launch the investigation because the family is suspected of using inside information for their stock trading,” Lim Kyu-joon, an FSC spokesman, said. “Our investigators will manage the case directly because it will take time to obtain a report from the Korea Exchange.”
The announcement came after the women attracted strong criticism for selling their stocks before filing for receivership in order to avoid losses. Market watchers say that Choi may have saved some 500 million won from the sale because the shipper’s share prices dropped sharply after it announced that it was filing for receivership.
If company executives and major shareholders gain profits or avoid losses using undisclosed information this can affect its share price. If they are found guilty of such activities, they could face prosecution or fines from the financial authorities.
The probe is aimed at establishing whether there were any illegalities in the trading, said Lim, adding that the investigation has nothing to do with the contribution of private assets by the company’s largest shareholders during restructuring.
Choi is now chairwoman of Eusu Holdings which has shipping-related affiliates under its wing. In April 2014, Korean Air led by Chairman Cho Yang-ho acquired a 33.23 percent stake in Hanjin Shipping for about 400 billion won to become the largest shareholder.
Cho’s younger brother Soo-ho ran the shipping company until he died in November 2006 and then his wife, Choi, managed the cash-strapped company amid a prolonged slump in the shipping industry after the 2008 financial crisis.
Shares in Hanjin Shipping have fallen 28 percent so far this year. It shifted to a net profit of 3 billion won in 2015 after inking a net loss of 423.33 billion won a year earlier.
Hanjin Shipping, the country’s biggest container carrier by sales, was to apply for self-rescue measures later Monday, which require approval from its creditor banks to get its business back on track.
Hanjin and other local shippers have been struggling with falling freight rates amid a protracted slump in the world’s economy. Hanjin Shipping has to pay off or refinance 500 billion won worth of debt that will mature in the first half of the year. At the end of last year, its total debt reached 5.6 trillion won.