Bribery scandal hits Eximbank, K-Sure

Lee Duk-hoon Eximbank CEO

By Jung Min-ho

High-ranking officials of state-run financial institutions have been arrested on suspicion of taking kickbacks in exchange for colluding with a head of venture firm Moneual in a $3 billion mortgage fraud.

Korea Eximbank CEO Lee Duk-hoon’s chief secretary, surnamed Seo, and an employee of Korea Trade Insurance Corporation (K-Sure), surnamed Heo, allegedly received at least 10 million won ($9,000) each for helping Moneual increase its credit line, according to the Seoul Central District Prosecutor’s Office, Thursday.

With its borrowing limit enlarged, Park Hong-seok, head of the domestic manufacturer of vacuum cleaners, borrowed 3.2 trillion won ($2.9 billion) from 10 banks over the past six years.

Park was indicted on charges of mortgage fraud and embezzlement after the company filed for court receivership on Oct. 20. The company now has 670 billion won in debts.

Prosecutors believe that Seo and Heo turned a blind eye to Moneual’s exaggerated export performance; on documents, Park overstated the company’s export figures by 3.2 trillion won over the past six years, which was actually less than 24 billion won.

The prosecution said Seo was a loan officer when he took the money. Investigators recently grilled another high-ranking employee of Korea Eximbank over suspicion of taking bribes.

Early this month, prosecutors raided the office of K-Sure and secured evidence that Heo and other officials received bribes from Park.

Before the company filed for court receivership in Suwon District Court, one of K-Sure officials reportedly quit his job and left Korea.

Investigators are also looking into whether other people in the financial industry have been involved in the fraud.

After receiving the loans, Park transferred the money to his overseas accounts and used it for personal purposes, spending the funds on gambling and buying houses.

Park is a U.S. citizen, and his younger brother, vice president Park Min-seok is a Canadian citizen.

Experts say K-Sure’s failure in checking Moneual’s export records, shipping documents and bank statements increased the scale of damage. Ironically, K-Sure guaranteed the company’s financial status.

In 2012, Korea EximBank selected Moneual as one of Korea’s 300 “hidden champions,” a list of purportedly small but strong businesses. Then, Korea EximBank alone offered interest-free loans worth 250 billion won to Moneual over the past two years.