NH NongHyup Bank criticized for questionable biz practices, employee misconduct

National Agricultural Cooperative Federation Chairman Kang Ho-dong speaks during a parliamentary audit at the National Assembly in Seoul, Friday. Yonhap

National Agricultural Cooperative Federation Chairman Kang Ho-dong apologized for a slew of financial irregularities Friday.

He also announced plans to implement a mid-to-long-term growth strategy for responsible management.

"I deeply apologize for causing great concern to the public," he said during an Agriculture, Food Rural Affairs, Oceans and Fisheries Committee audit at the National Assembly in Seoul.

"We will deny financial support for cooperatives involved in questionable practices. Our internal controls will be strengthened to regain the lost trust of the public."

The apology came in response to a question from Rep. Lee Yang-soo of the ruling People Power Party regarding ongoing instances of employee misconduct at the holding company's bank subsidiary and agricultural cooperatives.

The lawmaker said 81 percent of irregularities, exceeding 1 billion won ($729,000) at NH NongHyup Bank reported over the last five years, occurred this year.

"Over the past five years, six irregularities totaling 36 billion won have been reported," Lee said during the audit. Of that amount, 29.3 billion won occurred this year.

This includes approximately 12.1 billion won in improperly granted loans using falsified collateral, as well as over 10.9 billion won extended based on fraudulent sales contracts.

Apart from the bank, cooperatives reported irregularities of 110.1 billion won over the same period. Only about 47 billion won has been recovered.

There were 75 cases of embezzlement and 55 cases of unauthorized lending.

Some employees changed phone numbers and account passwords in the system to transfer funds.

The cooperatives remain outside the scrutiny of financial authorities and report only to the federation, the lawmaker noted.

"Employee misconduct at the cooperative is the sole responsibility of the federation. Repeated occurrences and even a rise in the number of irregularities speak volumes about the internal control failures of the federation," Lee said.

The NongHyup subsidiary is among many lenders facing heavy criticism for employee misconduct.

Woori Bank extended 35 billion won in improperly granted loans to the relative of former group chair Son Tae-seung. Several bank employees have embezzled a combined total of tens of billions of won over the past few years.

Prosecutors raided Son's home on Friday. A former high-level Woori Bank official was indicted in detention on Tuesday. Prosecutors allege the official expedited the loan approval process for Son's relative. He faces charges of receiving bribes.