Former finance minister gets illegal break on loan

Murky relations with top bank officials alleged

Former finance minister Lee Hun-jai received a loan at an interest rate below market level from Korea Exchange Bank, and is suspected of influence peddling in the sale of the nation’s fifth-largest lending body, a source in the financial sector said.

“Lee borrowed 1 billion won (1 million USD) from Korea Exchange Bank (KEB) between 2002 and 2003 at an annual interest rate of 6 percent, which was much lower than the market rate of 7.5 percent at the time,” a KEB official said, asking to remain anonymous.

“Such a favor would have been impossible without direct instruction from someone at the higher level of the bank,” the official added.

The loan also had a three-year maturity and was based on credit, not usually given to a borrower with Mr. Lee’s profile, deepening suspicion of his involvement with high-ranking KEB officials.

Mr. Lee’s aides deny any wrongdoing, saying that the former finance minister received the loan as given by the bank and did not give much thought about the interest rates.

Mr. Lee, who served as finance minister between 2004 and 2005 and as the head of the Financial Supervisory Service between 1997 and 2000, was banned from leaving the country last week for his alleged involvement in murky business transactions in connection with the controversial sale of KEB to U.S. equity fund Lone Star.