Former FSS official probed for alleged ties with Keangnam Enterprise

Former FSS official probed for alleged ties with Keangnam Enterprise. May. 19, 2015 07:24. becom@donga.com.

Prosecutors have probed Kim Jin-soo, 55, a former Financial Supervisory Service (FSS) deputy governor, for allegedly giving a favor to Keangnam Enterprise in its workout process on Monday. An investigation into a corruption scandal of an energy project of the company is spreading to the political and financial community.

The Seoul Central District Prosecutors’ Office subpoenaed Kim for allegedly abusing his power and investigated how the third round of the workout process started for Keangnam Enterprise in October 2013. Kim allegedly put pressure on the executives of Shinhan Bank, the main creditor, and other creditor banks to “review the case in a positive manner from the perspective of the majority shareholder for the bigger cause.” Back then, he was reported by an accounting firm that (Keangnam Enterprise) Chairman Sung (majority shareholder)’s capital stocks must be reduced without consideration because the company was in a bad financial position.

Keangnam Enterprise was in a liquidity crunch after recording a net loss of 24.3 billion won (22.3 million U.S. dollars) in 2012. It could get additional loans after Kim met three creditor banks including Shinhan Bank in April 2013. In March 2014, the company got an additional 630 billion won (579.8 million dollars), including a debt-to equity swap of 100 billion won (92 million dollars) without reducing the capital of Sung’s shares without consideration. “It is extremely rare that the FSS was involved even before the main creditor bank started discussions with other creditor banks,” a source from prosecutors’ office said.

Prosecutors raided the houses of Kim and former FSS Senior Deputy Governor Cho Yeong-je, the FSS and Shinhan Bank and investigated related people in the banks early this month. They confirmed that Kim demanded creditor banks accept a debt to equity swap.

Prosecutors are also probing into the allegation that Kim asked for a favor to Sung who was then a member of the National Policy Committee of the National Assembly in return for giving a favor to Keangnam Enterprise. They confirmed that Kim visited Sung’s office at the National Assembly and sent his resume to him at a time when the company started a workout process in November 2013. Kim was promoted from a director to the deputy governor of the FSS in April last year.

It was reported that Kim repeatedly stressed in the probe that he did what he was supposed to do as a director in charge and what he did was not a favor. Prosecutors will consider requesting an arrest warrant and investigate whether other personal connections such as former FSS Governor Choi Soo-hyun were involved in the process.