By Kang Seung-woo
Pohang University of Science and Technology (POSTECH) and Samsung Dream Scholarship Foundation are set to take KTB Asset Management to court for losses from their investment in a troubled local savings bank.
Through the asset manager’s private equity fund (PEF), the two sides invested 50 billion won ($46.4 million) apiece in Busan Savings Bank in June last year, when the nation’s largest secondary bank carried out a paid-in capital increase worth 150 billion won.
But, the Financial Services Commission (FSC) suspended the operations of the savings bank and its affiliate Daejeon Mutual Savings Bank on Feb. 17, citing capital inadequacy caused by mounting insolvent project financing (PF) loans. As a result, POSTECH and Samsung ended up losing all their money.
They said KTB cajoled them to put their money into the suspended bank, bragging about its involvement in Busan’s acquisitions of Jungang Busan Savings Bank in 2006 and Daejeon Mutual Savings Bank in 2008 and its familiarity with Busan.
KTB CEO Chang In-whan and Park Yeon-ho, chairman of Busan Savings Bank, attended Gwangju Jeil High School.
“KTB failed to inform us of accurate investment information, including its Bank for International Settlements (BIS) ratio on Busan Savings Bank,” said a POSTECH official.
The aftermath of the global financial crisis weighed heavily on the Korean property market last year, while soured PF loans were going steadily downhill.
However, thanks to the 100 billion won investment Busan’s BIS ratio, which was below 8 percent at the time, was boosted to 8.31 percent. A savings bank whose BIS ratio is over 8 percent is seen as a blue-chip one.
The two sides have recently consulted a law firm about retrieving the lost money and suing the KTB CEO on charges of swindling
In addition the angered scholarship foundation, which has more than 760 billion won in assets, has recently withdrawn some 140 billion won it had in a KTB fund.
The KTB CEO said that there were no irregularities with the investment.
“I underwent questioning as a witness by the Central Investigation Department of the Supreme Public Prosecutors’ Office in late March and it concluded that I was not guilty of any illegal transactions,” Chang said in a media interview. “But what I missed at that time was Busan’s fraudulent accounting, but how could I find wrongdoings that the Financial Supervisory Service (FSS) and an accounting firm did not recognize.”