Mirae-Blue House scandal brushes bigwig in financial world

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Mirae-Blue House scandal brushes bigwig in financial world

The scandal surrounding Kim Chan-kyong, chair of the suspended and debt-ridden Mirae Savings Bank, is widening as prosecutors Monday obtained a statement from a related official that a former chair of a leading financial group is allegedly involved.

The JoongAng Ilbo reported Monday that Mirae was asked by an administrative officer at the Blue House surnamed Kim to help his older brother recover control of a hospital he once owned, and organized a complicated financial transaction to do so.

The Blue House suspended Kim from his duties following the report.

Mirae’s Kim Chan-kyong, 56, was arrested and charged with embezzlement and breach of trust early this month after prosecutors launched investigations into alleged financial irregularities at four suspended savings banks, including Mirae and Solomon Savings Bank.

According to the central investigation unit of the Supreme Prosecutors’ Office, the saga began in October 2009 when the hospital owned by the older brother of the Blue House official, which is in Yongin, Gyeonggi, applied for court receivership after failing to pay back a 16 billion won ($13.7 million) debt. When the hospital owner applied for court receivership, he had planned to appoint a friend as a legal administrator so he could regain management control after the debt was written off. But the court chose a third party as the hospital’s legal administrator, and he was stymied, according to prosecution sources.

The hospital owner requested help from his younger brother at the Blue House and he asked Mirae Savings Bank Chairman Kim to help.

The central investigation team has recently confirmed that the National Agriculture Cooperative Federation, which was the primary bond holder of the hospital under court receivership with 12 billion won worth of bonds, sold its bonds to the United Asset Management Corporation (UAMCO) in 2010 for 2.7 billion won. UAMCO was established in 2009 by Korea’s commercial banks - Shinhan, Woori, Hana, Industrial and Kookmin - to privately manage bad loans.

Why the National Agriculture Cooperative Federation sold at such a low price is not known.

According to prosecution sources, in December 2010, UAMCO sold the bonds to a shell company set up by Mirae Chairman Kim for 5 billion won. Though UAMCO made 2.3 billion won in profit on the deal, the price was low, and the actual market price is estimated at more than 9 billion won.

Last October, Chairman Kim allegedly returned the hospital to the original owner, the older brother of the Blue House official, after receiving around 6 billion won, prosecutors said.

But they are now focusing on the middle transaction: UAMCO’s purchase and sale of the hospital’s bonds.

Prosecutors have obtained a statement from a Mirae Savings Bank official surnamed Kim saying that he “met the chairman of a leading financial group at his office in November, 2010, under the order of Mirae’s chair.

“The chairman of the financial group at that time called in the group’s attorney surnamed Cho and asked about the hospital,” the Mirae official said. “The chairman then sent me and the lawyer to UAMCO [to negotiate the sale of the hospital’s bonds].”

The official also stated to prosecutors that “I had thought back then that the financial group chairman had exerted influence in the sales process,” the official said, “because [when we visited UAMCO], an official doubted the possibility of a privately owned financial institution selling hospital bonds worth 9 billion won for 5 billion.”

The former chairman of the financial group denied all allegations.

“I haven’t even met Kim [the Mirae official who talked to prosecutors] and don’t know who lawyer Cho is at all,” he told the JoongAng Ilbo on Monday. “I know nothing about the hospital. Even if I had told UAMCO to sell the hospital bonds at a cheaper price, would they have accepted my request?”

By Park Jin-seok, Sohn Hae-yong [angie@joongang.co.kr]
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