Moneual employee says many knew about scam
A former employee of Moneual, which shocked the financial industry and the market with its large-scale fraud, said in an exclusive interview with the JoongAng Ilbo that the scam by the company’s top executives was planned from day one.
The Korea Custom Services on Friday unveiled most of the details of the fraud that the management pulled off for more than five years, such as taking out 3.2 trillion won ($2.98 billion) worth of loans by using fabricated export data. But this was the first time a former employee has talked about what he witnessed.
Moneual grabbed the public’s attention and was hailed as a champion start-up that pulled itself up from being an underdog in the tech industry to becoming a globally-praised company whose revenue last year exceeded 1 trillion won.
That achievement was praised highly, but the illusion that it had everyone blinded started to reveal its true nature when the company requested court receivership on Oct. 20.
The former employee met with the JoongAng Ilbo late last month and said the architects behind the sham were CEO Harold Park (Hong-seok), his brother and vice president, Scott Park (Min-seok), and another vice president, Won Duck-yeok.
After working at the company for more than five years as a mid-level official, the employee was in a position to see the inflows and outflows of money, as well as the actual earnings the company was generating.
He said that most of the employees realized in 2010 that the revenue was fabricated. Since then, he said many workers have joked among themselves that they were actually public servants, since their paychecks were coming out of the Industrial Bank of Korea’s pockets.
According to the former employee, the company relocated its headquarters to Jeju Island in February to take advantage of the local government’s system in which companies with strong export prospects are exempt from corporate tax for five years.
The employee said the recent developments at Moneual vaguely reminded him of the Sewol incident. The captain, or in this case the top executives, bailed out first while the innocent children, or the public’s money, became the victim and the relevant authorities failed to do their jobs.
Q. Was the fraud planned from the beginning?
A. Achieving 1 trillion won in revenue in just three to four years is impossible unless it is fabricated. The headquarters in the U.S. [Irvine, California] are the actual headquarters.
The documents were fabricated as if the parts were being exported [to the U.S.] since the finished product is larger and more expensive [than the parts]. That way it was easy to borrow loans by credit through cooked-up revenue. The capital increases created from acquiring Zalman Tech [in 2011] were spent on running Moneual. The management ran the company with recklessness that was already planned.
Every summer, they would make overseas trips, stopping in Hawaii. They drove luxury cars like Mercedes-Benz and BMW. Where do you think all that money came from?
But they’ve won a lot of awards overseas.
That’s the point of the management’s scheme, which they referred to as “American-style play.” Chairman Park has U.S. citizenship and his brother’s nationality is Canadian. The name of the company is actually a mix of his two daughters’ names with mon, which means mine in French.
They put the most effort into the Consumer Electronics Show held in Las Vegas every year. They would spend huge amounts on buying the booth and would create teams of six or seven employees whose target was to win awards. The innovation awards can be won only with an idea. So the team was headed by Won, who has a design background.
The company’s robot vacuum cleaner appeared on numerous homeshopping shows.
Last year it appeared in more than 20 shows. But to make it a hit product, the company purchased prime time slots on homeshopping shows. Because the product itself lacked in quality, it needed a cover. So they created a 300 million won advertisement [featuring Korean actor So Ji-sub]. There is no technology that the company created on its own. The robot cleaner was developed by a company with only five to six employees that Moneual acquired. And the home theater TVs and PCs were all made in China.
Did the employees know?
Not all were aware, but they started to realize that the company was running without any real products since 2010. The employees said the limit would be 1 trillion won and everything would be flooded out when that limit was surpassed. They knew that there would be an investigation into the company after revenue exceeded 1 trillion won. Since they knew that the company was rotten, there were a lot of employees who found other work, including part-time jobs.
Why didn’t you report it to the authorities?
I could have reported it to the Financial Supervisory Service. But if I said the right things, I would have lost my job. And they tried to keep it under the rug by paying employees when questions were raised. The employees were concerned about making a living and the pay was relatively good. For an employee of my level, at mid-management, the income was 5 million to 6 million won per month. Also there was no pressure from the top for better performance so most people remained silent and the company said it would pay up to 30 million won for my children’s tuition fees if I send them to the international school.
Didn’t the government or the financial market have any suspicions?
Not at all. In fact, they awarded the company for being a “hidden champion.” Some of the loans were used to pay off debt while the rest were used for management costs. And the projects from the government were used to pay employees’ salaries and for the management team’s embezzlement. Some of the nation’s leading mobile carriers and kitchen goods companies approached us saying that they want to benchmark us, pursue joint marketing and some even proposed joint development in the Internet of Things business. The company said 90 percent of its sales were made in the U.S., but I have never seen our products in the U.S. market.
BY LEE SO-AH [email@example.com]