FSS official investigated in large-scale loan fraud

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FSS official investigated in large-scale loan fraud

The Seoul Metropolitan Police Agency said yesterday that it has summoned for questioning a Financial Supervisory Service (FSS) official who they suspect is involved in large-scale loan fraud.

The scandal involves an employee at KT ENS, a subsidiary of the country’s No. 2 mobile carrier, and eight of its subcontractors, who were found to have borrowed 1.8 trillion won ($1.6 billion) and embezzled 289.4 billion won in loans over the past five years.

The police believe the official in the country’s financial watchdog, surnamed Kim, gave information to subcontractors regarding the FSS’s internal investigation into the fraud, which began in January.

According to the authorities, Kim was tipped off by an FSS official involved in the investigation, and subsequently gave that information to a subcontractor, only identified as Seo, 47.

Kim and Seo allegedly held two meetings in January and February to discuss how to evade the authorities, police added.

Seo, one of the main suspects in the case, is believed to have bribed Kim with entertainment and trips, including a jaunt to the Philippines in 2008 and giving away a part of his property in Siheung, Gyeonggi, worth approximately 600 million won.

The police also suspect Kim helped the president of another subcontractor, surnamed Jeon, to flee to New Zealand via Hong Kong on March 4, just days before the police launched their investigation. Authorities believe Jeon may be hiding out in Vanuatu, an island in the South Pacific.

Seo and Jeon also allegedly spent nearly 30 billion won of the embezzled money to buy cars and real estate, including apartments and villas in and outside of Seoul, using the rest to merge other businesses and pay off the interest on private loans.

The FSS recently suspended Kim from his position.

So far, the police have arrested eight people, including the KT ENS employee and the company’s subcontractors. They are also investigating seven others, including employees of those subcontractors.

Authorities also found that the legal seal KT ENS uses for official documentation - which the company previously insisted was kept secure - was left lying out on a desk and freely used by a part-time worker.

BY LEE YU-JUNG AND KIM BONG-MOON [bongmoon@joongang.co.kr]

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