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Mining the truth all-important

Published: 17 Jan. 2012, 20:39

The Ministry of Foreign Affairs and Trade has suspended Kim Eun-seok, its deputy minister and ambassador for energy and resources, on suspicion that he participated in stock-price rigging of the mining company CNK International, the shares of which skyrocketed due to a much-publicized diamond exploitation project in Cameroon. The ministry said Kim cannot carry out his public duties as long as he is suspected of pocketing illegal gains.

The scandal first surfaced when the Foreign Ministry touted the deal to develop resources, which involved a private company, as a government project. CNK’s stock price jumped nearly five-fold after the ministry issued a press statement in December 2010 saying that the company won the right to develop diamonds in a mine in the southeastern town of Yokadouma in Cameroon, which has estimated reserves of 420 million carats.

Kim’s relatives and acquaintances are suspected to have been tipped to buy shares in the company ahead of the government statement, which resulted in them pocketing enormous profits. The Board of Audit and Inspection embarked on an investigation after legislators raised the issue during questioning of the Prime Minister’s Office. In the latest findings, Kim’s brother and wife were among Kim’s relatives who purchased several hundred million won worth of shares in CNK.

If the findings prove to be well-grounded, the consequences will be severe. The government would have been part of a major stock scam by hyping a private company’s overseas deal to boost the share prices to benefit relatives and acquaintances of the nation’s political inner circle.

Stock manipulation is a deplorable financial crime that can disrupt the financial order and undermine trust in the system at the expense of other investors. And cases like this question the morality of the government as well as the country’s credibility.

The Cameroon government’s report on the size of potential diamond reserves, citing the research findings of the ministry that were in fact fabricated, caused enormous damage to those investors who based their investment decisions on the government release.

The Board of Audit and Inspection must get to the bottom of this case. Prosecutors should investigate the legality of the case and seek severe punishment to set a precedent to guard against the threat of moral hazard in public office.