MBN, three executives indicted for fraud

Prosecutors indicted Maeil Broadcasting Network (MBN) and its three executives for accounting fraud Tuesday.

MBN’s senior executive members Lee Yoo-sang and Ryu Ho-gil were indicted for violating the Financial Investment Services and Capital Markets Act and Act on External Audit on Stock Companies.

Chang Seung-joon, also a senior executive at the company and son of Chang Dae-whan, former chairman of the Maekyung Media Group, which runs both Maeil Business Newspaper and MBN, was indicted for violating the Commercial Act.

MBN was originally a business news channel, but was authorized by the nation’s communications and broadcasting regulator to offer general-programming content in 2011. Before then, only three terrestrial broadcasters - KBS, MBC and SBS - were allowed to offer general programming. Along with MBN, JTBC, TV Chosun and Channel A also gained authorization that year. In order to gain this authorization, MBN had to prove that it had at least 300 billion won ($258 million) in capital assets.

MBN allegedly used some 54.9 billion won of the company money to buy its own stocks to prepare this seed money. Because there is a limit on how much of its own stocks a company can buy, MBN is said to have used the bank accounts of its employees to make it appear as if they had bought the stocks voluntarily.

In the process it committed accounting fraud, prosecutors said, and violated other financial laws.

A sub-committee within the Financial Services Commission requested the prosecution to look into the accusations on Oct. 30. If found guilty, the authorization for MBN to offer general-programming content may be rescinded. Following the indictments, MBN Chairman Chang Dae-whan resigned from his post Tuesday.

“Chairman Chang decided to step down to take responsibility for the accusations and he will no longer be running the business,” MBN said in a written statement Tuesday. “We will speak truthfully in the coming trial. We will also ensure to create a more transparent business model at the company and modernize the accounting system as well.”

Employees of MBN who are members of the National Union of Media Workers issued a statement on Tuesday. “The resignation of Chang is only the beginning,” the statement said. “We are on a path to normalize operations at the company, and we will have to reform the company inside out to regain the trust of the people.”

BY ESTHER CHUNG, YONHAP [chung.juhee@joongang.co.kr]