Investors sue Woori over misleading investments
People who purchased Woori Bank’s investment trust commodities, later revealed as investments in the trouble-plagued “pi-city” development, filed a lawsuit against the bank.
Six customers of Woori Bank including a 64-year-old man surnamed Kim filed a lawsuit yesterday asking for a refund of about 220 million won ($199,763) of investments at the Seoul Central District Court.
Because many other customers purchased similar instruments from Woori and other banking institutions, the case could prompt hundreds of billions of won worth of additional lawsuits.
The pi-city project was a plan to create a commercial distribution center in a 35-story building that would house logistics companies and a shopping mall on 758,606 square meters (187.5 acres) of land in Yangjae-dong, southern Seoul. Total investment was supposed to be 2.4 trillion won.
The operator of the project, Pi-City company, purchased expensive land in 2006 but failed to pay back loans from banks as their design for the building wasn’t approved until November 2009.
In 2012, the Central Investigation Unit (now defunct) of the Supreme Prosecutors’ Office found that Choi See-joong, a close associate of former President Lee Myung-bak and former chairman of the Korea Communications Commission, received a large sum of money from Lee Jung-bae, developer formerly in charge of the pi-city project, in return for expediting construction approvals. A lobbyist, Lee Dong-yul, allegedly worked as a middleman to make the payments. The lobbyist received 1.1 billion won from the developer between 2007 and 2008 and paid up to 600 million won to Choi.
“Woori Bank introduced the instrument as a safe investment product that guaranteed 8 percent annual interest, but we never received such interest and even our principal wasn’t returned when the investment period expired in February 2009,” the complaint to the court stated.
“They invested the money without worries because the bank introduced the instrument as a type of a regular savings,” said Shim Bo-mun, an attorney for the plaintiffs. “They didn’t even know they were investing in pi-city.”
In 2007, Woori Bank sold 190 billion won worth of investment trusts to 1,500 customers, and the bank invested their money in a fund operated by UBS Hana Asset Management. An additional 200 billion won was invested by other institutions. UBS Hana used the 390 billion won to purchase bonds issued by the developer.
But pi-city was already in serious trouble by 2007. Lee, the CEO of the company, was burning through the development’s cash. According to a document obtained from the court exclusively by the JoongAng Ilbo, about 440 billion won of the company’s total 1.12 trillion won borrowed from banking institutions was used without invoices. Lee is in prison after being sentenced to six months in jail in February for embezzlement.
By Choi Hyun-chul, Kwon Sang-soo [firstname.lastname@example.org]