The Korea Deposit Insurance Corp. and its subsidiary KRNC are mired in controversy over setting up paper companies in tax havens by former executives and employees of the two state-run financial companies.

The Korea Center for Investigative Journalism, known locally as Newstapa, on Saturday released another batch of six Koreans found to have operated two ghost companies in the British Virgin Islands.

The six included Kim Gi-don, former CEO of KRNC and former senior manager of KDIC, and five others who have retired from the deposit insurer.

This latest revelation is expected to put them and the state-run companies in a tight spot, while the Financial Services Commission may be called on to respond as the regulatory body has management jurisdiction over the KDIC. KRNC was previously named Resolution & Finance Corp.

The KCIJ claimed that they established Sunart Finance in September 1999 and Trackvilla Holdings three months later for dubious reasons.

It added that those paper companies were set up during the Asian financial crisis without reporting it to the National Assembly and the FSC. This is a violation of the country’s financial law, according to the KCIJ.

The KDIC said that it established the paper companies as a means to swiftly manage and retrieve overseas assets of Samyang Merchant Bank, which fell apart in the aftermath of the financial crisis.

Most of the merchant bank’s asset holdings, located in China and Hong Kong, were real estates in a “complex structure.”

The state-controlled deposit insurer also stressed that it was able to retrieve some $20 million of public funds through these ghost companies after injecting taxpayers’ money into troubled assets.

The question, however, remains as to why the two ghost firms had to be founded under individual employees’ names and not officially under the names of the KDIC or KRNC.

Some of the six turned out to have worked at Samyang Merchant Bank, the KCIJ said.

It said the KDIC failed to come up with official records documenting the operations of the paper companies, further fueling suspicions of possible attempts to hoard unreported funds in tax havens.

By Chung Joo-won (joowonc@heraldcorp.com)