KT unit’s loan scandal challenge to new boss

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KT unit’s loan scandal challenge to new boss

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The dynamic new chairman of the nation’s second-largest mobile operator, Hwang Chang-gyu, faced an unexpected curveball just weeks after taking office.

KT ENS, a subsidiary of KT embroiled in a massive loan swindle against local banks, announced its official stance yesterday that?the company?has nothing to do with the incident.

“KT ENS has never issued any?false account receivables or payment guarantees, as the banks claim,” said a spokesman for KT ENS. “We assume that the loan swindle was conducted by an individual employee in cooperation with a company set up by subcontractors.”

On Thursday, the Financial Supervisory Service and the police said a 51-year-old official of KT ENS identified by the name Kim was under investigation for allegedly embezzling 280 billion won ($260 million) in loans issued to a company that was set up by the KT unit’s contractors. The company was created in order to cash accounts receivable bonds. The loans were from Hana, KB and NH as well as 10 credit companies.

“We did not know about the incident, as the receivables were not issued?through a normal process,” the spokesman said. “Since we have not yet received related documents from the financial institutions, we still cannot confirm the relevance of the facts.”

Chairman Hwang adopted aggressive changes since his first day at work and promised more transparent management. Last year, KT was accused of selling a satellite to a Hong Kong-based operator without proper authority.

The denial by the KT subsidiary was criticized from the start.

“KT should be making an apology before denying their involvement,” said an investor who asked not to be named. “What can one expect from a company that secretly sells a satellite?”

Despite the scandal, KT’s stock only dipped 0.3 percent compared to the previous day. Even on Thursday when news of the fraud broke, KT only lost half a point.

The police said yesterday they believed that the financial institutions that were swindled could grow to at least 17.

Kim is in the custody of the police.

The FSS?plans to request an arrest warrant and is tracking the accounts of KT ENS and its subcontractors to trace the loans.

The Supreme Prosecutors’ Office?also embarked on an investigation yesterday as the credit companies made a formal complaint.

On Thursday, the FSS said Kim committed massive loan fraud by forging tax bills and sales confirmations, adding that KT ENS purchased products such as mobile phones from the subcontractors. The subcontractors would then submit false account receivables to banks based on the fabricated documents.

The banks?claimed?that they did not know the receivables were forged for the past six years until last month. During that period, they issued loans to the company more than 100 times.

The financial watchdog said it will investigate whether there were any irregularities in the issuing of the loans to see if the banks neglected their duties.


BY KIM JUNG-YOON [kjy@joongang.co.kr]

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