Prosecutors said Friday they have opened an investigation into several executives of the state-run Korea Development Bank, including former chairman Min Euoo-sung, on suspicion of incurring massive losses to the bank in a 2009 acquisition of a life insurance firm.
Min and several other incumbent and former KDB executives are under suspicion of taking over Kumho Life Insurance Co. for an above-market price, inflicting losses to the bank run with taxpayers’ money, the financial sector bureau of the Seoul Central District Prosecutors’ Office said.
The accused executives knowingly overlooked Kumho Life’s potential bad debts worth 183.6 billion won ($163.1 million) when KDB took over the insurer in December 2009 from financially squeezed Kumho Asiana Group, a factor leading to a 258.9 billion won loss in the state-run lender.
KDB took into account only 57.8 billion won in bad debts that Kumho Life voluntarily reported to the bank, which led to a misprice in share value. That led KDB to pay 5,000 won per Kumho Life share, whose fair market price was later determined to be worth only minus 152 won.
The executives are also accused of bypassing a necessary due diligence on Kumho Life’s finances and making the acquisition decision without a required notification to outside directors in breach of duty, prosecutors’ recent investigation showed.
KDB took over a controlling 65.6 percent stake in the life insurer jointly with Consus Asset Management Co. before renaming it KDB Life Insurance last year.
