38 charged in savings bank scandal

Prosecutors charged 38 high-ranking officials of the state financial watchdog for receiving land from indebted savings banks that shut down last year due to insolvency.

The joint investigation team of the prosecution held a press conference yesterday and released their second report on the massive financial scandal of debt-stricken savings banks, three months after they indicted 13 officials through their first probe.

In their second probe, they indicted 33 officials and arrested five additionally, including Park Bae-su, a close confidant of President Lee Myung-bak’s elder brother Lee Sang-deuk, and Kim Jae-hong, a cousin of the president and the board chairman of KT&G Welfare Foundation. The total of illegal debts prosecutors found has amounted to 3.27 trillion won ($2.92 billion) so far.

Prosecutors yesterday said that they arrested a vice-chief-level official surnamed Kim of the Financial Supervisory Service and two other high-ranking FSS officials surnamed Shin and Lee, on charges of receiving bribes from Tomato Savings Bank. Shin had been already indicted on charges of receiving bribes, including an Armani suit and a Rolex watch worth about 135 million won in total.

According to the prosecution, the three officials got a housing loan from the Tomato Savings Bank to build a house together in Gapyeong, Gyeonggi, in 2004. They borrowed 800 million won and bought land for the house under the name of Shin’s elder brother.

However, in 2006, the bank exempted them from paying back the principal and the interest, to lobby the three officials who were responsible for auditing the debt-ridden bank. The officials then didn’t build the house but divided the land and then sold part of it to one FSS official and three Tomato Bank officials.

The land value for the four FSS officials was originally about 320 million won, but the price rose to 520 million won afterward, prosecutors said, and they obtained massive benefits through the land.

“All costs related to the transaction of the land were paid by the bank,” a prosecution official told JoongAng Ilbo.

“However, we only indicted three of the four FSS officials, because the fourth one wasn’t in charge of auditing the bank, so his land isn’t considered a bribe.”

By Park Jin-seok, Kim Hee-jin [heejin@joongang.co.kr]