LIG insists it will pay back cheated small investors
On Wednesday, LIG Corporation, the holding company of the group, said it “will give back 100 percent of financial losses to retail investors to be socially responsible” and that “the funds will be raised by having the largest shareholder give up private property.”
“We will begin distributing investment principles and promised interest payment to investors from Nov. 14 at our office near Gangnam Station [in southern Seoul],” an official from LIG Corporation said. Initial investments will be distributed to victims this year.
In September, a Seoul court sentenced LIG Group Chairman Koo Cha-won, 78, to three years in prison and Koo Bon-sang, 43, the chairman’s eldest son and vice chairman of defense manufacturer LIG Nex1, to eight years for having sold 210 billion won ($197.3 million) worth of LIG Engineering and Construction commercial paper over a period of six months from October 2010 to March 2011, even though they were aware the company was at risk of going bankrupt.
The construction company filed for court receivership in March 2011. It sold short-term debt to around 700 retail investors.
“We decided to give retail investors back their principle money and promised interest payment,” the official from LIG Corporation said.
When the group sold the paper to retail investors mainly through Woori Investment and Securities and LIG Investment and Securities, it had guaranteed them 7 percent to 8 percent annual interest.
According to LIG Corporation, the group will give back a total of 130 billion won worth of investment principle and guaranteed interest payments to retail investors through Dec. 31. Before he was indicted, Chairman Koo said in October 2012 that he would do his best to be socially responsible and make up the financial losses of retail investors.
The major shareholders of LIG Group are Chairman Koo and associates. Industry sources note that the family will raise money by selling part of the shares it holds in LIG Insurance or take out loans with the shares as collateral.
As of the first half of this year Chairman Koo and associates owned 23.1 percent of LIG Insurance. If that amount of shares is not enough for the group to raise the money, then it will consider selling real estate held by the family. Chairman Koo is the eldest son of former LIG Chairman Koo Chul-hoi, who was the younger brother of LG Group founder Koo In-hoi.
Chairman Koo Cha-won expanded from the general insurance business by establishing more than 10 affiliates in other industries. The company started to face liquidity shortage when its construction arm LIG Engineering and Construction started to struggle after the global financial crisis. The construction affiliate was established by acquiring two local construction firms.
Amid LIG’s efforts, there is growing attention given to how Tongyang Group will handle investors that bought high-risk commercial paper and corporate bonds of the conglomerate’s risky affiliates through Tongyang Securities.
Last month, Tongyang Group Chairman Hyun Jae-hyun appeared before National Assembly lawmakers during a parliamentary audit session of the Financial Services Commission and hinted that he and his family were willing to sacrifice their private fortunes to compensate financial victims. According to the Financial Supervisory Service, about 50,000 private investors are on the verge of losing more than 2 trillion won.
When a lawmaker asked Hyun if he was willing to spend his own money, the chairman said that he “will do everything” he can.
BY LEE TAE-KYUNG, LEE EUN-JOO [email@example.com]
More in Industry
70 percent of workers in Korea are burned out, survey says
Boryung's cancer drug line gets GMP certification
Chaebol revert to remote working as Covid-19 cases rise
CSAT survival tools