Moneual execs arrested over export fraud

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Moneual execs arrested over export fraud

The national customs authority announced yesterday that Moneual CEO Park Hong-seok and two other executives at the company were arrested on the suspicion of submitting false export documents for home appliances worth more than 3.2 trillion won ($3 billion) from early 2009 through July this year.

In addition to the executives, 13 mid-level employees were indicted, an official from the Korea Customs Service’s main office said at a press briefing where it unveiled results of the first part of its investigation.

The customs office began its initial investigation into Moneual in August when a whistle-blower reported the fraudulent activities. The issue resurfaced when the vacuum robot developer filed for court receivership last Monday at Suwon District Court. The company recorded 1 trillion won in annual revenue last year and has received praise from Bill Gates.

Over the six years, Moneual reported exports of 3.2 trillion won worth of home theater PCs, a device considered outdated.

“We are regretful [of this situation]. It is strange that a company would record multiple trillions of won in exports simply from one outdated product,” Han Seong-il, head of the investigation team, said at the briefing.

According to the customs office and the financial industry, Moneual borrowed a total of 3.2 trillion won from 10 banks over the past six years. The Industrial Bank of Korea and the Korea Development Bank were the two biggest lenders, industry sources said. Of the 3.2 trillion won the company has taken out, it has yet to pay back 674.5 billion won, the customs agency said.

CEO Park said during the investigation that the fraud dates back to 2007 when a U.S.-based business partner returned a shipment of home theater PCs, causing a financial crisis at the Korean company. The executive figured out that Moneual could re-export the low-quality PCs to China and Hong Kong, which allowed the company to continue to borrow money from Korean banks.

In the early stages of the scheme, Park said he sold the PCs to Chinese conglomerates, the state-run company CNBM and the hotel chain Wanxing. He then stopped sending the PCs altogether, and instead submitted fake export documents to Korean banks while lobbying the Chinese conglomerates with a high commission of up to 1.5 percent of the company’s total annual sales to get them to sign the forged papers.

To deceive Korean banks and credit companies, Park opened a factory and storage centers in Hong Kong to make it seem as if Moneual was producing the home theater PCs there. The customs office found that of the 3.2 trillion won worth of cheap computers exported, only 24 percent came from Korea, and 76 percent, worth 2.4 trillion won, were made in Hong Kong.

Park typically had only three to five employees at the company’s factory in Hong Kong. However, once Korean financiers visited Hong Kong to investigate the production lines, he hurriedly hired 30 temporary workers to make it seem as if the factory was operating.

Once the banks approved the loans, the funds were sent to a paper company under the CEO’s name. Park spent very little of the loans on maintaining the factory.

He spent 24 billion won on lobbying the brokers who made connections between Moneual and the Chinese conglomerates, buying another factory in China, and on maintaining his private property. He spent another 12 billion won to purchase properties in Gangnam District and Jeju Island, and on gambling and personal investments.

Of the 4 billion won Park spent on gambling at local casinos, a significant amount was given as a bribe to unidentified Koreans. The customs authority said it will request that the prosecutors’ office investigate the matter.

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