Prosecution confirms illegal loans, seeks arrest warrants

The Seoul District Prosecutors¡¯ Office investigating the loan scandal of Dongbang Mutual Savings & Finance Co. sought arrest warrants for Chung Hyun-Joon, president of Korea Digital Line (KDL), and Lee Kyung-Ja, vice president of Dongbang, Friday on charges of fraud and violation of the mutual savings & finance law.

Prosecution officials said that they have confirmed that Chung and Lee played leading roles in securing illegal loans worth 43 billion won and 12 billion won, respectively.

The prosecution also plans to press charges against officials of Dongbang and Daeshin Mutual Savings & Finance who colluded with Chung and Lee for the illegal loans.

The Financial Supervisory Service recently reported the amount of illegal loans that it believed Lee had taken after tracing bank accounts under borrowed names. But as the amount sharply differs from that found to have been taken by leading figures in the scandal, prosecutors said that they also summoned FSS officials to find out the truth. The financial watchdog reported Wednesday that 63.7 billion won in illegal loans was taken out, 49.4 billion under the name of Chung and KDL affiliates, but the whereabouts of 14.3 billion won remained unknown. However, prosecutors said that they discovered only 43 billion won was loaned to Lee after analyzing virtually all the loan-related bank documents and statements of people involved.

Prosecutors said that the FSS may have mistakenly calculated legal loans as illegal ones, but it is very likely that much more money than the amount announced by the FSS was loaned illegally.

As the loan scandal gradually comes to light, the prosecution is carrying out investigations to determine whether some of the money was used to bribe high-ranking FSS officials and leading politicians. Prosecutors also called in Chang Sung-Hwan, president of Yuil Semiconductor, to confirm Chung¡¯s allegation that he gave Chang 1 billion won in funds for lobbying in return for solving problems related to the issuance of bonds with warrants (BW) of Yuil, a company listed on the Kosdaq market.

The prosecution is also investigating the properties of Chang Lae-Chan, former director of the FSS¡¯s non-banking sector inspection bureau, who is suspected of having pocketed 359 million from Lee to make up for losses from his investments in KDL stocks. Chang is also suspected of having invested 100 million won in a private fund set up by Chung.

Prosecutors said that they have also embarked on full-scale investigations into the allegation that other incumbent FSS officials were involved in the bribery scandal. A prosecution official said there is a possibility that some of the 359 million won allegedly handed over to Chang may have been funneled to other figures. Assuming there is a good chance that political and government figures invested money in Chung¡¯s private fund under false or borrowed names, prosecutors obtained the list of 20 subscribers of Chung¡¯s fund from the FSS and are checking their identities.