EX-KNOC chief grilled on resources

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EX-KNOC chief grilled on resources

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Kang Young-won

Prosecutors looking into corruption in the Lee Myung-bak government’s so-called resources diplomacy initiative summoned Kang Young-won, former CEO of the Korea National Oil Corporation (KNOC), who is a suspect in a shady deal that resulted in heavy losses of taxpayer money.

Resources diplomacy, a signature initiative of the Lee administration, was an attempt to secure natural resources for Korea through large investments overseas. But many of the investments are now considered to have been expensive duds that cost the nation, while benefiting select individuals and companies.

When the state-run oil corporation acquired Harvest Operations Corp., a Canadian oil and gas company in 2009, it also acquired subsidiary North Atlantic Refining Limited (NARL), a Canadian oil refinery, for 1.22 billion Canadian dollars, or 1.37 trillion won ($1.23 billion). Originally, NARL was not included in the deal. KNOC ended up selling NARL for only 32.9 billion won four years later.

Kang showed up at the Seoul Central Prosecutors’ Office at around 9:30 a.m. Monday.

“I’m going to tell everything to the prosecution and cooperate with the investigation,” he told reporters.

In November and last month, prosecutors raided Kang’s residence, KNOC headquarters and Merrill Lynch International Seoul, which provided financial counseling to KNOC. Investigators are reportedly questioning Kang on motives for acquiring NARL along with its mother company.

KNOC’s acquisition of NARL is considered the shadiest deal of the resources diplomacy program.

The prosecution believes KNOC decided to buy the Canadian oil refinery at a price much higher than its market price, possibly in an attempt to overstate the size of the deal.

Merrill Lynch’s Seoul branch is suspected to have played a part in the deal. It assessed NARL’s asset value at $9.61 a share. Kang allegedly suggested $10 a share for the deal.

The real value, according to the Board of Audit and Inspection of Korea, was $7.30 a share, amounting to a total of about a trillion won, or 941 million Canadian dollars.

The prosecution is considering requesting a pre-trial detention warrant for Kang.

BY KIM BONG-MOON [kim.bongmoon@joongang.co.kr]

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