ed Collapse of venture firm

The abrupt court receivership filing on Oct. 20 by Moneual Inc., a leading venture company in home appliances, is creating a big stir in the business community. Privately-owned Moneual, once acclaimed by Microsoft founder Bill Gates as a company to keep an eye on, posted revenue of 1.27 trillion won as well as an operating profit of 11 billion won last year.

While the truth is still murky, the company is suspected of inflating its export figures and forging documents to receive huge loans. Because the company, which won fame by manufacturing top-notch robot vacuum cleaners, isn’t listed on the stock market, it might have been easier for the company to cook its account books.

The loans extended to the company amount to about 670 billion won, much of which was lent by state-run banks such as the Industrial Bank of Korea. The lenders granted 300 billion won to Moneual based on export credit guarantees issued by the Korea Trade Insurance Corp. (K-Sure).

The banks and K-Sure have been passing the buck to each other over the loans. K-Sure said it issued the guarantees based on the banks’ settlement reports between exporters and importers, arguing that the banks should have confirmed actual export transactions on the spot. But the banks claimed that the guarantees are equivalent to loans and thus K-Sure should be responsible for failing to confirm the company’s export results.

In any case, the fiasco appears to be the result of perfunctory reviews of loan applications conducted only on the basis of surging sales and forged documents of a fast-growing venture company. This is certainly a typical case testifying to lax risk management entrenched in our financial sector and loose bank supervision on the part of our financial regulators.

Simultaneously, it’s suspected that the state-run banks might have softened their loan examination, aware of the government’s overblown obsession with a creative economy championed by President Park and her administration.

The company’s filing for court receivership came as a shock because there had been little indication of such a filing, but as it turned out, audit reports have raised lots of suspicious elements. The company, for example, borrowed money by handing over trade receivables worth 1 trillion won, and its cash income from business operations remained at only 1.5 billion won. That’s how Woori, the main creditor bank back in 2012, smelt a rat and was able to retrieve all its loans from the company.

Moneual’s collapse is a reminder that the nation’s export finance system is still beset with serious problems and there should be major improvements in our lending schemes for venture companies. If not, we won’t be able to say confidently that similar incidents won’t take place in the future.