Agency files suit, saying banks won’t have to ruffle Hyundai

After the former chairman of Hyundai Group and several executives took out fraudulent loans they didn’t repay, several major banks did not try to recover the money because they feared the conglomerate would do less business with them, a government agency said yesterday.
So the Korea Deposit Insurance Corp. did something it’s never done. It filed suit itself to recover a total of 29.1 billion won ($31.4 million) in fraudulent loans made in 1998 and 1999, the state-owned agency said in a release.
Korea Deposit Insurance Corp. said yesterday it will sue Hyundai Group’s Chairwoman Hyun Jeong-eun and former executives of Hyundai Engineering and Construction and Hynix Semiconductor.
Both companies, which were Hyundai affiliates at the time, were suffering heavy losses.
Hyun is the widow of former Hyundai Group Chairman Chung Mong-hun. As an inheritor, she is thus a defendant, the release said.
Hyundai Group released a statement protesting the decision. “The late Chung Mong-hun did everything he could, including donating his own assets to Hyundai Engineering and Construction,” it said. “At that time, Chairwoman Hyun Jeong-eun was not in management.”
Woo Byung-woo, head of the special non-performing loan investigation team at the deposit insurance corporation, said eight former Hyundai Engineering executives used false financial statements in 1998 to take out 27.6 billion won in loans they never repaid, and four Hynix Semiconductor executives did the same thing to take out 1.5 billion won in loans in 1999.
The late Chung was listed as a defendant in both cases.
Under Korean law, the state agency can file a suit to recover money if a financial institution refuses its request to do so.
The Korea Deposit Insurance Corp. said it asked the financial institutions affected, including Shinhan Bank and SC Korea First Bank, to file for the compensation. However, the agency said the institutions would not do so because of their business relationships with Hyundai Group.
The insurance corporation said it would continue to seek compensation against executives to recoup public funds if financial institutions reject its requests to file such lawsuits.
In a similar case, the Seoul Central District Court ruled in 2005 in favor of three financial institutions, including Korea First Bank, after they filed a lawsuit against Chung Tae-soo, the chairman of the former Hanbo Group, and one of his sons. They had to repay 25 billion won in fraudulent loans.

By Limb Jae-un Staff Writer [jbiz91@joongang.co.kr]