[Focus] Role in stock manipulation questioned

As the prosecutor's office is to investigate iRegent Group chairman James Mellon, the fraud scandal of Jin Seung-Hyun has become an international issue.

The Financial Supervisory Service (FSS) on Oct. 24 informed the prosecutor's office of Koh Chang-Gon, former Regent Securities president, along with Jin, for their involvement in manipulation of stock prices. Initially, the FSS tried to investigate chairman Mellon, but he did not comply with it. So it asked the prosecutor's office to investigate him.

The investigation by the FSS showed that Mellon in October 1999 asked Jin to buy 15 billion won worth of Regent Securities stocks. He tried to amass Regent Securities stocks through Jin and later bought the stocks from Jin. With the request of Regent, Jin massively purchased stocks between Oct. 7 and Nov. 19 last year.

At that time, Regent Group purchased Regent Securities stocks up to the legal limit and bought additionally through the account established by Regent Group Hong Kong. In other words, Regent utilized a third party in order to secure its shares beyond its limit.

Officials of Regent Group admitted that they had asked Jin to purchase Regent Securities shares, but they contended that it was not designed to raise the stock price. Jin, who used eight different accounts to trade Regent Securities stocks, was accused on charges of manipulating stock prices.

The key issue is Koh's role in the process of Jin's buying of Regent Securities shares. In the process, Koh loaned up to 28 billion won to Jin by utilizing the fund of Regent Securities. Regent Securities loaned the fund to Emerging Venture Capital, and the fund was channeled to MCI Korea, which is headed by Koh.

For this reason, the FSS found that Koh provided the fund to Jin to handle the stock price and reported the violation to the prosecutor's office. Also, the FSS is suspicious about Mellon's role. Park Hee-Tae, director general of FSS, said that the agency asked the prosecutor's office, as Mellon apparently masterminded the stock price influence, or, at least, assisted in the illegal behavior.

Last January, Jin asked Korea Online (KOL) to buy 5.76 million shares, or 8 percent of its entire volume, at 6,000 won per share -- par value of which is 1,000 won. KOL officials said that they postponed the purchase because they were unable to confirm whether Jin had secured that much volume and because bad rumors about him spread in the market. The officials said that an e-mail dated Feb. 19 was intended to find out whether he really had the stocks, noting that the deal was not completed, as Jin failed to submit accurate information about his ownership of the stocks.

At that time, the stock price fell substantially. Jin claimed that Regent refused to buy the stocks from him, as they would lose a large amount of money in line with the falling stock price. With the crash of the stock price, Jin suffered a loss of nearly 10 billion won. Also, the Korea Stock Exchange (KSE) learned of the manipulation of the stock price and informed the FSS.

The FSS twice asked chairman Mellon to report for an investigation of his role in the handling of Regent Securities stock price, but Mellon refused to comply with the request, saying that he is busy with businesses. So the FSS handed over the investigation to the prosecutor's office.

Now, it is in doubt why Regent Group tried to purchase its own stocks, even escaping the legal net. High-ranking officials of the FSS said that Regent Securities must have tried to raise its stock price and sell shares to other companies for a massive gain. Or, he might have tried to boost Regent Securities' stock price in order to raise the value of KOL, which is a holding company of Regent financial group.

FSS officials, completing their nine-month investigation of chairman Mellon, concluded to commission the investigation to the prosecutor's office. It seems that there are many problems that the prosecutor's office has to tackle.

Choi Young-Hae moneychoi@donga.com