KB computer feud flares

What seemed like an abating conflict among top management at KB Financial Group looks as though it is flaring up after an unexpected legal move yesterday by KB Kookmin Bank President Lee Kun-ho.

Lee filed a lawsuit against three executives - two at the holding company and one of his own at the bank - to the Seoul prosecutors’ office on business obstruction charges related to the decision to change the group’s computer system from an IBM mainframe to the UNIX system.

If the executives are found to have spread false information or obstructed business by abusing their power or rank, they could face a prison sentence of up to five years or a maximum fine of 15 million won ($14,790).

The bank president claimed in his report to prosecutors that the three executives intentionally withheld information such as risks from the report that was used in the financial group’s decision on changing the computer system.

The three executives are Kim Jae-youl, CIO of the financial group; Moon Yoon-ho, head of the IT planning department at the financial group; and Cho Geun-chul, managing director at the bank’s IT department.

All three already have been slapped with a heavy “punitive warning” penalty by the Financial Supervisory Service (FSS) on the same issue. Due to the punitive action, all three men will be prohibited from working in the financial industry for three years after retiring.

The bank’s president argued the penalty on the men shouldn’t be taken lightly as the nation’s economy could be thrown into chaos if the computer system of the nation’s biggest bank, KB Kookmin, is paralyzed.

“Knowing this and withholding such information in the report submitted to the board members is unacceptable,” Lee argued. He also said the UNIX system has failed its performance test, having shut down more than 1,700 times, and installation of the system could only cause a huge financial loss to the bank.

As part of his move, he announced a reshuffling of the organization late Tuesday that ousts the IT executive, Cho.

Lee’s action comes almost a week after the Financial Services Commission (FSC) decided to give light warnings to both the KB Financial Group chairman, Lim Yong-rok, and the bank president.

Soon after the decision, the two executives went on a one-night Buddhist temple stay along with other executives of the financial group as an act of reconciliation.

However, there is speculation that Lee’s move could reignite the tensions between the two top managers of the financial group.

After the FSC decided in favor of light warnings last week, the labor union demanded sterner penalties against the two. Union members claimed that the power struggle between Lim and Lee was dividing the organization, discouraging employees and damaging its public image.

The management tension at KB is the biggest feud seen among banking giants since the Shinhan Financial Group power struggle in 2010 that resulted in the chairman, vice chairman and bank president stepping down.

Aware of public discontent over the feud between him and the financial group chairman, Lee stressed that his lawsuit against the IT personnel had nothing to do with Lim.

In April, board members of the financial group voted to switch from the current IBM mainframe service, whose contract expires in July 2015. The company has long been preparing for the changeover process.

However, the bank president had a change of heart and opposed the decision, citing irregularities, including the falsification of assessment reports and the risks of the UNIX system.

The president in May asked the FSS to investigate the situation.

BY lee ho-jeong [ojlee82@joongang.co.kr ]