Chang denies advice on corrupt investment in Busan Savings Bank
The snowballing lobby scandal involving Busan Savings Bank is taking a new twist as two scholarship foundations threatened to sue an asset management agency, claiming that it advised them to invest in the failing bank.
The private Pohang University of Science and Technology and Samsung Dream Scholarship Foundation said they would file a lawsuit against Chang In-whan, president of KTB Asset Management, who they claim has advised the two to invest 50 billion won ($46.5 million) each in Busan Savings Bank, knowing the lender was failing financially.
Chang, accused of helping the lender due to his school ties with key persons at the bank, immediately denied the allegations, saying they had already been dismissed in March by prosecutors.
Chang In-whan
The latest court battle between investors of Busan Savings Bank and the asset manager widens the irregularities subject to investigation by prosecutors who have already found evidence that the troubled lender had been lobbying many politicians to block regulators from ordering operation halt.
The KTB chairman is accused of pulling money out of the private foundations to help raise the capital adequacy ratio of the lender he has personally connections with.
“KTB Asset Management led the capital increase of Busan Savings Bank by bringing in funds from the foundations but we’re also victims of accounting fraud at the lender,” Chang said Tuesday.
“A total of 100 billion won from KTB was part of the capital increase for Busan Savings Bank last June, so I have no problem defending myself also as a victim.”
Financial regulators and prosecutors have since January been widening investigations into auditors and shareholders of the regional lender after its operations were suspended earlier this year.
The Financial Supervisory Service in February suspended the lender for capital shortage along with seven other regional lenders in the secondary banking sector. The case uncovered a series of graft scandals at the country’s top financial regulator who were lobbied to hide financial problems at the banks they were supervising. It is becoming a political fight involving Cheong Wa Dae after prosecutors picked up clues that the lobbyists had attempted to lobby top government officials as well.
The suspended lenders from this year are Samhwa, Busan, Busan II, Jungang Busan, Daejeon, Jeonju, Bohae and Domin Savings Bank.
Industry insiders suspect that Chang lobbied private foundations and politicians to save the lender from intensive auditing using his school ties. The bank’s chairman, vice chairman and three presidents are all graduates of Gwangju Jeil High School. Chang, and the bank’s auditor, a former employee of the FSS, are also Gwangju Jeil alumni.
Capital ratios at mutual savings banks in the secondary banking sector have been falling after their project finance loans on real estate projects went sour due to the sluggish property market and the 2008-09 financial crisis.
By Cynthia J. Kim (
cynthiak@heraldcorp.com)