A ballooning illegal lobbying scandal involving failed savings banks has implicated politicians as well as senior financial officials.

Prosecutors investigating Samhwa Mutual Savings Bank have secured statements from Sin Sam-gil, its arrested chairman, that he gave tens of millions of won in slush funds to a current and a former lawmaker, officials said Friday. They are now trying to determine whether it was part of his illegal lobbying attempt to salvage the suspended lender, they said.

Rep. Gong Sung-jin of the ruling Grand National Party, one of the two politicians named, strongly denied the accusation. The former lawmaker, said to be a member of the main opposition Democratic Party, also denied taking bribes from Sin.

The Financial Supervisory Service, the nation’s financial regulator, suspended operations of Samhwa, citing severe capital shortage. Sin was arrested three months later for illegal lending worth 70 billion won.

Rival political parties on Friday continued to exchange accusations. The ruling Grand National Party blamed the main opposition Democratic Party for the irregularities by the banks which it says grew under the previous DP regime. The DP voiced suspicions that key members of the current administration may have been involved.

Meanwhile, suspicion continued to grow that Kim Jong-chang, governor of the FSS until March this year, may have been pulling strings for another suspended savings bank, Busan Mutual Savings Bank, so that it could survive regulatory inspections.

The FSS is the nation’s top financial regulatory body that examines and supervises savings banks and other financial institutions. In February, it suspended the bank, citing deteriorated capital soundness. Prosecutors have so far found that the bank had engaged in illegal lending and other financial irregularities totaling about 7 trillion won.

In February 2010, Kim reportedly stopped for about a week an examination into the Busan bank then conducted by the FSS and the Korea Deposit Insurance Corp. In April that year, he made a strong protest against the BAI, which had issued a report pointing out lax monitoring of the Busan savings bank by FSS. Kim demanded the BAI cancel the report.

There is also suspicion surrounding a real estate trust company he founded. The firm, Asia Trust Co., invested 9 billion won in the troubled bank in June last year.

Kim was said to have disposed of all of the company’s shares held by his wife upon inauguration as FSS chief in March 2008, but it was revealed Friday that the titles to shares were only transferred to one of his friend on trust arrangement.

The prosecution plans to summon Kim for questioning as early as Friday.

Suspicions regarding Kim surfaced after Eun Jin-soo, a former commissioner of the Board of Audit and Inspection, was arrested earlier this week on charges of receiving 70 million won in bribes from Yoon Yea-seong, an arrested financial broker and lobbyist hired by the Busan bank. Eun is said to have contacted Kim to ask for a lenient inspection.

Prosecutors sought Friday an arrest warrant for Kim Gwang-soo, commissioner of the Korea Financial Intelligence Unit of the Financial Services Commission, on bribery charges. In 2008, he headed a department which oversees savings banks at the commission, which is the supreme financial regulatory agency that controls the FSS.

By Lee Sun-young (milaya@heraldcorp.com)