Theft Is Criminal, Not Just ImmoralThe Laws Against Stealing Taxpayers'' Money Should Be Enforced Strictly
The government has confirmed that it spent 109.6 trillion won($90.8billion) in public funds since the onset of the economic crisis in 1997 through to August this year. Out of 64 trillion won raised in accordance with parliamentary approval, 43.5 trillion won has been funneled into the state-run Korea Deposit Insurance Corp. to increase capital for unhealthy financial institutions and pay back depositors.
After a lengthy controversy, legislators approved early this month an additional 40 trillion won to be raised in public funds and they also passed a special law governing the management of public funds; the aim being to minimize taxpayers'' burdens by requiring objectivity, fairness and transparency in the raising, operation and management of public funds. The ruling and opposition parties have also agreed to have a detailed inquiry into the use and the management of public funds.
The public has been aware of the astronomical amounts of money being injected into the financial sector, but it has been left in the dark as to how the funds have been used. Based on news reports, people could only make guesses about just some the problems arising from the management and appropriation of funds.
Joongang Ilbo investigated the management of public funds and reported that it was marred with problems. It found that their management and supervisory system were in disarray. Following these news reports about moral hazards at state-aided financial institutions people were furious and felt betrayed.
Belatedly, Parliament saw the seriousness of the problem and in passing the special law has decided to exercise checks on the management of public funds, checks which will include a parliamentary inquiry. But people still find it difficult to understand the fact that nearly 110 trillion won has already been spent and that 60 trillion of them will not be recovered, leaving taxpayers to pick up the bill.
Further more, whether the proposed additional 40 trillion would end the demand for further public funds is not clear. The amount of 150 trillion won is a huge financial burden on the people. It means a debt equivalent to 3 million won for every South Korean.
Questions are also being asked about the government''s assertion that there would be no additional public funds to be raised. A look at news reports about the latest financial scams, including a case of Dongbang Mutual Savings and Finance Co., gives a warning that the volume of public funds needed is bound to increase rapidly.
The biggest shareholders of some mutual savings companies abused their statutory power to get massive loans, and If these companies are not able to recover the loans extended to them and consequently fail to repay their depositors, the Korea Deposit Insurance Corp. will pay back a certain amount to depositors in accordance with the government''s deposit protection program. This amounts to big shareholders who received loans stealing taxpayers'' money.
The government will hardly be able to avoid the criticism that it misuses public funds to make up for its failure to prevent misappropriation of funds by big shareholders and employees in financial institutions.
The term "moral hazard" has frequently been cited. But moral hazard differs from criminal activity. For example, it cannot be simply a moral hazard when big shareholders of financial institutions conspire with their managements to get unlawful loans. According to news reports, some mutual savings companies help big account holders to divide their deposits into small accounts using borrowed names so that they can get some deposit repayments guaranteed under the government''s deposit protection program. This is criminal activity.
It has yet to be seen how many of the irregularities the parliamentary inquiry will be able to uncover. It is also not easy to predict how effective the new legislation designed to improve the supervision of public funds will be. What is clear is that people are strongly demanding that the government enforces laws on "criminal activity" of misappropriating public funds strictly and thoroughly. The government cannot expect people to have confidence in it when public funds defrauders continue to thrive on their hidden assets. What we need at this junction is a Javert, the inspector in "Les Miserable", who is committed to enforce the true spirit of the law, not irresponsible government officials who consider public funds have nothing to do with them.
The writer is a lawyer at the Kim & Chang Law Firm.
by Shin Hi-taek