Illegal Money Shuffle Benefited Hyundai, Opposition Charges

An opposition lawmaker asserted Sunday that the government in April temporarily increased the capital of the Korea Credit Guarantee Fund, a state institution, through illegal means for the purpose of guaranteeing Hyundai's debts.

Representative Lee Hahn-koo said that Jin Nyum, the deputy prime minister for economic affairs, had asked the state-run Korea Development Bank to lend 700 billion won ($538 million) to the Small and Medium Industry Promotion Corp. and asked the corporation to pass the money on to the Korea Credit Guarantee Fund on April 4. According to Mr. Lee, Mr. Jin promised the corporation that he would take the money to be repaid to Korea Development Bank from the state budget.

Mr. Lee backed up his charges with documents provided by the Korea Credit Guarantee Fund and the Small and Medium Industry Promotion Corp.

They showed that the corporation had obtained a no-interest, 12-year loan of 700 billion won from Korea Development Bank on April 6. On the same day, the corporation handed over 700 billion won to the Korea Credit Guarantee Fund which at the time was unable to extend any more credit guarantees because of mounting losses reaching 6.4 trillion won.

The fund has guaranteed a total of 886.6 billion won since January when acquiring corporate bonds became easier. More than three quarters of that sum, 688.8 billion won, went to Hynix Semiconductor and other Hyundai affiliates.

"The fund's capital increase took place only on paper and the government has been hiding the illegal deal," Mr. Lee said. "Now the Korean people have to pay for the 700 billion won."

An official at the Ministry of Finance and Economy explained that the fund's guarantee limit had increased to 14 trillion won with the help of the Small and Medium Industry Promotion Corp., and that the corporation had provided the 700 billion won within that amount. He added that the promise to repay the loan from the state budget is in accordance with the principle that the government would provide funds in case the fund goes bankrupt.

by Lee Soo-ho