By Kim Rahn
The prosecution launched an investigation into another mutual savings bank Wednesday over alleged illegal lending practices, causing jittery depositors to withdraw their money.
Prosecutors at the Seoul Central District Prosecutors’ Office said they were looking into the Prime Savings Bank after the Financial Supervisory Service (FSS) filed a complaint earlier this year against the bank’s largest shareholder for possible illegal loans.
According to the FSS complaint, the bank’s largest shareholder, Prime Development which is Prime Group’s de facto holding company, borrowed more than was legally permitted.
“The shareholder acknowledged the wrongdoing. We are checking whether the bank committed illegal lending by setting up special-purpose companies as other savings banks did, but we haven’t found such irregularities yet,” a prosecutor said.
Prime Bank officials said the FSS detected lending beyond the legal limit in a regular audit and the bank was correcting this.
The news that the bank was being looked into by the prosecution scared depositors following the recent collapses of debt-ridden savings banks. Depositors withdrew as much as 41 billion won ($38 million) from the bank’s five branches in Seoul, showing signs of a bank run, according to the FSS.
In the ongoing investigations into other savings banks, the prosecution found that a Cheong Wa Dae official received a salary from an affiliate of the corruption-ridden Busan Mutual Savings Bank.
Baek Yong-ho, presidential secretary for policy planning, allegedly received 45 million won over 14 months between 2007 and 2008 when working as an advisor to Seoul Credit Rating and Information, an affiliate of the bank.
He is the second presidential aide to have been allegedly paid by corrupt savings banks, following Chung Jin-suk, senior presidential secretary for political affairs who was an outside director for Samhwa Mutual Savings Bank for three years from 2004.
Baek was a professor at Ewha Womans University and a nongovernmental member of the Public Fund Oversight Committee during that time. He was also a member of the presidential transition team after President Lee Myung-bak won the election in late 2007.
The presidential aide said he landed the adviser role as university professors are usually offered them, adding he didn’t know it was an affiliate of Busan Mutual Savings Bank.
In the meantime, the prosecution is tracing bank accounts of Rep. Gong Sung-jin of the governing Grand National Party and former Democratic Party lawmaker Lim Jong-seok, who are suspected of receiving money from Shin Sam-gil, the honorary chairman of Samhwa Mutual Savings Bank.
Shin told investigators that he gave 180 million won to Gong through the latter’s younger sister, while providing 100 million won to an assistant to Lim. The honorary chairman was indicted in April on charges of extending some 70 billion won in illegal loans.