[FORUM]Bailouts and the 'public enemies'

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[FORUM]Bailouts and the 'public enemies'

Bailout funds given to banks and corporations have become a public enemy. No one seems to remember that the money was invested by the government in order to prevent a breakdown of the monetary and financial system; instead, most Koreans think that the money was strewn about and wasted by a few public enemies who had also triggered the original financial crisis that made the bailouts necessary.

Two of those persons who have been targeted as "public enemies" recently approached me. I had never met them in person before, but they seemed to need someone to talk to. They shared their stories after acknowledging their own mistakes. Here is the brief summary of their stories:

"We are a group of poor elders in our 60s who recently retired after working for a construction company all our life. We were given the titles of board members when our companies were on the verge of going bankrupt during the foreign exchange crisis. But in reality, we've never even attended the board meetings. I was responsible for general affairs. He was working in a foreign branch. Obviously, we knew nothing about the company's audit situations. But we are now put at risk of losing our homes and property because of civil lawsuits that might be filed against us. Is this what we've worked for our whole lives? We know the importance of recovering public funds, but why should my property be under a threat of seizure to pay back the bailout debts?"

The reason these men have been targeted for public abuse is simple; their names are on corporate documents that say they are the trustees of their company.

The response of the Korea Deposit Insurance Corporation, the organization that will eventually decide whether or not to file civil lawsuits, is also simple.

"The insurance corporation will accept all documents that might explain why some aspects of our recovery efforts are unfair to individuals," a corporation official said. "If the documents prove the person had nothing to do with decisions made by the corporate board, those persons would be exempted from suits. But seeing their chops on the documents related to the bailouts, it would be difficult for board members to escape legal liability."

Eventually, the insurance corporation will be taking these distressing cases to court. Perhaps that is an obvious measure, considering that the insurance corporation also cannot afford to be charged with failing to do its duty in trying to recover the money.

There are other "public enemies" in Korean society. One was the representative of a guarantee insurance company just before the foreign exchange crisis. As usual, a few of the companies to whom he gave guarantees went bankrupt. A criminal lawsuit was brought against him for deciding to give a guarantee to one of the companies. His bank accounts have been rummaged through, but nothing serious was found. No clear charges have been proved against him in the first trial, but the appeals court found him guilty and he is now awaiting the results of an appeal to the Supreme Court.

Ours is a shameful past, but most of us are familiar with the atmosphere in the average Korean corporation prior to the foreign exchange crisis. What a company's representatives or biggest shareholders said and did then became the rules and formulas. The directors and board meetings were just rubber stamps.

So it was an obvious response for Koreans to try to strengthen the role of corporate directors and give them more authority to oversee their company's management after the foreign currency crisis in 1998. But if we ask the directors of companies before or during the crisis to give up their property only because of legal liabilities, it would be like accusing them of living in the wrong time.

If the law puts the legal burden on the representative in financial organizations for judgments they made, then who would want to make decisions on guarantees and loans? Why do companies need techniques of risk management and reimbursement for bad loans?

When companies accepted bailouts during the crisis, there was little discussion of whose money they were using. But now that the bills are coming due, everyone is suddenly looking for public enemies.


The writer is a senior economic writer of the JoongAng Ilbo.

by Kim Su-gil

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