Senior prosecutor's insider dealing

By An Junseong

There has been a series of news coverage on lucrative stock investment case related to a senior prosecutor in Korea. His name is Jin Kyung-Jun and is the current commissioner of Korea Immigration Service under Ministry of Justice. He allegedly obtained insider information and purchased then-unlisted stocks of Nexon, a Korean game developer, in anticipation of the enlisting at the Tokyo Stock Exchange.

According to the Korean Government Ethics Act, prosecutors and judges are required only to report their incomes on an annual basis. Public disclosure requirement is applied only to senior levels such as senior prosecutors. Jin’s stock transaction has been under strict scrutiny. He was ranked the sixth among 1,813 senior government officers with the total asset of over 15 billion won. Without mandatory disclosure requirement, it would have never been discovered at all. If the Government Public Ethics Committee finds any false entry, serious omission, misentry, or extortion, he shall be subject to one of the followings: warning, fine up to 20 million won, public notice on daily newspapers, or request for dismissal.

A legal loophole has been found: no conflict of interest test is available for junior judges and prosecutors in Korea. Such a test is applied only to the senior positions. It is unlikely that Jin would face any criminal penalty since the statute of limitations has already run for all the criminal charges, including bribery under the Korean Criminal Code and using undisclosed information under the Securities and Exchange Act. The controversy centers on two issues: The first is the possibility that Jin knowingly purchased the stocks at a lower price by taking advantage of his prosecutor’s position. The second is the fact that Jin silently kept them during his tenure at the Financial Intelligence Unit where all the financial information, including unlisted stocks, is gathered for government supervision and investigation.

U.S. Department of Justice has two financial disclosure requirements for its employees. The former requires employees above GS-15 and administrative law judges to file a public financial disclosure report within 30 days of entering or terminating a covered position and annually. It is designed to identify potential or actual conflicts of interest. The latter requires employees at GS-15 or below to file a confidential financial disclosure report when it personally and substantially participates through decision or the exercise of significant judgment which could have an economic impact on a non-federal entity.

If any federal officer or employee of the executive branch, who personally and substantially participates through decision, approval, recommendation, investigation, or otherwise, has a financial interest, the person shall be imprisoned for not more than five years for willful violation. In addition, the Attorney General may bring a civil action with a maximum penalty of $50,000 for each violation or the amount of compensation which the person received or offered for prohibited conduct, whichever amount is greater.

The U.S. government has stricter ethics regulations in three respects. First, it has a broader scope. All federal judges, upon request, are required to file public financial report. Second, conflict of interest test applies to junior prosecutors as well. Third, it has a stronger penalty provision. The lump sum of $50,000 would prohibit de minimis violation whereas the forfeiture part would prohibit any mega transaction just like Jin’s case.

In order to prevent any reoccurrence of the above, the current government ethics rules need to be strengthened. Conflict of interest test, regardless of seniority, should be applied to all the judges and prosecutors. In addition, mandatory disclosure requirement should also be extended to top 10 percent of judges, prosecutors and other employees of the Ministry of Justice respectively. Furthermore, it is time to consider the possibility in tolling the statute of limitations until the termination of government employment for ethics violation investigation and prosecution.

The writer is a visiting professor at the Graduate

School of International Studies (GSIS) at the Yonsei

University and an attorney-at-law. Write to junseong@

hotmail.com.