By Kang Seung-woo
The top three chief executives of Shinhan Financial Group are expected to be summoned by prosecutors soon. The selection process of its new leaders is likely to be announced once the investigation is complete.
According to sources in the financial industry and prosecuting authorities Monday, the Central District Prosecutors’ Office will resume its investigation into former Chairman Ra Eung-chan, suspended CEO Shin Sang-hoon and Shinhan Bank CEO Lee Baek-soon this week.
The probe was on hold due to the G20 Seoul Summit. Although a group of investigators have already raided the offices of the three at the bank’s headquarters in Seoul where they confiscated computer files and other documents earlier this month to uncover evidence of their involvement in embezzlement, breach of trust and other acts of corruption.
To start with, the prosecutors will determine if Shin was involved in embezzlement and illegal lending.
The 62-year-old was suspended from his duties on Sept. 14, after Shinhan Bank filed a complaint against him, alleging that he had illegally extended 95 billion won ($83.89 million) in loans to companies connected to one of his relatives, while serving as its president between 2003 and 2009.
The bank also accused Shin of embezzling 1.5 billion won in advisory fees, which should have been paid to group honorary Chairman Lee Hee-kun.
Ra, 71, is also under investigation over allegations that he violated the real-name financial transaction system by using an illegally borrowed bank account to send money to a corrupt businessman for lobbying, while Lee, 58, is suspected of receiving 500 million won from Korean-Japanese shareholders in return for allocating 70,000 forfeited shares to them in April 2009.
Shin has claimed that Ra and Lee also took some of the advisory fees, and actually Lee allegedly raised slush funds by pocketing the consulting fees and gave some of the money to politicians, according to the investigators.
If all three are indicted as expected, they will not survive the pressure to step down from their posts.
Even though Ra quit the chairmanship last month, he still maintains his spot on the board of directors. The industry also expects that Shin and Lee will be forced to walk away if they are slapped with legal punitive action.
“It will be difficult for them to stay on in the financial sector, since the top priorities are confidence and morality,” said an official of the industry.
In addition, the possible indictment will force the laid-back board to rush to decide the future course of the group.
Regardless of the outcome of the prosecution’s probe, the financial services company’s Korean-Japanese shareholders in Osaka have already agreed to dismiss the trio for the recent internal feud and legal disputes.
Acting Chairman Ryoo Shee-yul and a special committee are expected to come up with replacements during its second meeting, scheduled for next week. At its initial gathering, Korean-Japanese outside directors asked Ra, Shin and Lee to resign.
Shinhan has openly expressed its desire to set up new management with inside appointments, but there is a chance, albeit slim, that if the process falls through, those outside of Shinhan may be approached.
Those inside Shinhan being considered for Ra’s replacement include former group CEOs Lee In-ho and Choi Young-hwi; Lee Hyu-won, CEO of Shinhan Investment Corp.; Lee Jae-woo, CEO of Shinhan Card; and Hong Sung-kyun, a former CEO of Shinhan Card.
Among the outside candidates, Kim Pyung-joo, a professor emeritus at Sogang University, and Lee Chul-hwi, former chairman of the Korea Asset Management Corp. (KAMCO), have been mentioned.