By Kim Yoo-chul
The Financial Supervisory Service (FSS) said Thursday that it will take punitive action against International Business Machines (IBM) Korea, if it is found to have offered “rebates” to get an online system overhaul deal from KB Financial Group.
"We are looking into personal bank accounts of senior executives at KB Financial and its flagship Kookmin Bank,” said an FSS official, asking not to be identified.
Accounts of KB Financial Chairman Lim Young-rok, Kookmin Bank President and CEO Lee Kun-ho, senior board member at the bank Chung Kyeong-ki and outside board directors are being checked for any unusual transactions.
"The ongoing special investigation will continue into next month. We want to leave no allegations and speculations unchecked," said another official.
IBM Korea’s spokeswoman said the company will work hard to defend itself and protect the interests of its clients here, although she declined to comment on the rebates, synonymous with bribes in Korea.
IBM Korea CEO Shirley Yu-Tsui has sent a letter to Lee to show that a decision by the bank's board of directors and Lim to switch the bank's main banking computer system to a less-pricey Unix-based one was risky.
She allegedly offered a heavy discount if the bank withdrew its plan to drop IBM as a system supplier, officials said.
After receiving the letter, Kookmin Bank management ordered officials to retain IBM.
In a related case, IBM was sanctioned by Chinese authorities for offering illegal rebates to its business partners and some decision-makers in return for favorable treatment.
"It's hard to understand why the IBM Korea CEO used her personal e-mail to send a letter to the CEO of its partner. IBM is desperate to keep Kookmin Bank as its client because if the bank decides to switch its supplier to a Unix alliance, then that will heavily hit it’s bottom line," said an IBM official asking not to be named.
KB Financial said the Kookmin Bank CEO authorized a plan to switch its core banking computer system in November last year after IBM had failed to meet the bank's requirements before their contract extension.
"But Lee suddenly overturned his decision after receiving a letter from Yu-Tsui, which is questionable," said a senior executive at KB Financial.
Meanwhile, the Financial Consumer Agency (FCA) asked prosecutors to start an immediate investigation into the allegations.
"Prosecutors should clear the issue as KB Financial and Kookmin Bank have been grappling with rebate-related issues whenever cash-intensive issues emerge," said FCA President Cho Nam-hee.
Kookmin is paying some 3 billion won monthly to IBM, bank officials said. Since early 2009, Kookmin Bank has been using IBM's z10 system as its core banking computer system. The bank's main data center operations and management are controlled by IBM servers.
Attracted by better pricing, leading local banks are switching to Unix-based equipment. The Industrial Bank of Korea plans to adopt Unix from October.