Savings bank scandal probe closes with 137 indicted

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Savings bank scandal probe closes with 137 indicted

The prosecution closed its lengthy investigation into the nationwide savings bank corruption scandal, charging a number of high-ranking bankers and politicians, including the brother of former president Lee Myung-bak.

The joint investigation team under the Supreme Prosecutors’ Office’s Central Investigation Unit, composed of top elite prosecutors and investigators, convened a disbanding ceremony yesterday to put an end to its 17-month-long probe into the 11 insolvent savings banks.

Starting from September 2011, the investigation team has indicted 62 suspects under detention and 75 without detention. The suspects include high-profile figures, including Lee Sang-deuk, elder brother of former president Lee. He was sentenced to a two-year jail term on charges of receiving bribes from savings banks and a conglomerate, but he has filed an appeal.

A total of 47 executives and major shareholders were also indicted, along with 21 incumbent lawmakers, 22 government officials, 13 brokers and 11 bank officials.

Of the 137 suspects, 31 have been convicted and trials for the rest of them are still ongoing.

Prosecutors found the bankers bribed politicians in return for leniency toward the banks that were focused on high-risk projects.

The scandal started in October 2010, when seven savings banks, which had attracted customers with high interest rates, proclaimed they would go bankrupt and shut down soon. That led to a massive bank run.

Not all of the customers got their money back. Those who deposited more than 50 million won($46,019) in their accounts could lose the remainder of that amount should the banks fail in their restructuring efforts, under the country’s depositor protection law. Also, customers who made more risky investments, such as on subordinated bonds, are expected to receive less than 10 percent of their principal, according to the state-run Financial Supervisory Service.

The majority of victims from the corrupt banks came from the Busan Savings Bank, a popular bank for residents in the southeastern coastal city. A National Assembly report said the average age of the victimized customers was 63.6, and 71 percent were from the low-income bracket, earning less than 1.5 million won of monthly salary, mostly working as temporary employees.

Prosecutors also found out that some major shareholders and executives of the failed banks embezzled 650 billion won in total of customers’ money into their private accounts under borrowed names. The slush funds have been returned to the banks.

The Supreme Prosecutors’ Office said most of the investigations into the 11 banks were completed and the ongoing trials will be handled by the Seoul Central District Prosecutors’ Office.

By Kim Hee-jin []
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