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Investigation involves several state-run organizations
Prosecutors investigating the Hyundai Motor Group’s use of illegal slush funds have detained Yon Won-young, former president of the state-run Korea Asset Management Corp. (KAMCO), Kim Yu-sung, former Korea Life Insurance auditor, and Lee Jung-hun, former KAMCO executive, on charges of receiving bribes in exchange for forgiving debts of troubled affiliates of the country’s largest automaker. Senior prosecutor Chae Dong-wook of the Supreme Public Prosecutor’s Office said that those in custody "are suspected of receiving kickbacks due to corruption within Hyundai Motor’s affiliates. We are considering seeking arrest warrants against them." In South Korea, detention of those under suspicion of having committed a crime is allowed for two days without an arrest warrant. The prosecutors searched the men’s houses, as well. The investigation concerns allegations that Mr. Yon, Mr. Kim, and Mr. Lee received kickbacks from Hyundai Automotive for writing off the bad debts of some of the automaker’s affiliate companies in 2002, and intervened in a resale of bonds by KAMCO to the Korea Development Bank (KDB). In the latter case, KAMCO had originally purchased bonds of the Wia corporation, a Hyundai affiliate, from KDB. KAMCO then established a company with the bonds in order to receive asset backed securitization (ABS) for the funds from the government. Upon receipt of the ABS for the bonds, KAMCO dissolved the company and resold the bonds to KDB at the original sale price, as opposed to the market value of the bonds at that time, saving the troubled Wia company a loss of 20.2 billion won (21 million USD).KDB and KAMCO claim nothing illegal was done in the bond reselling process. According to the prosecution, however, the two corporations collaborated with Kim Dong-hun, former head of local accounting firm Ahn Kwon & Co., and wrote off the Wia bond sale illegally. Kim Dong-hun stated during an earlier trial regarding illegal transactions at Hyundai Motor Group and its affiliates, "I used 3.36 billion won out of 4.16 billion won I took from Hyundai Automotive to lobby creditor banks and financial authorities." That trial resulted in the May 16 indictment of Hyundai Motor chair Chung Mong-koo on charges of financial wrongdoing. The prosecution’s detention of Mr. Kim, Mr. Yon, and Mr. Lee signal its investigation has turned from the head of Hyundai Motors to others involved. Creditors of troubled Wia and Aju Metal, another machinery affiliate of Hyundai group, included KDB and KAMCO, as well as Hana and Hanvit (now Woori) Banks, and Korea Life Insurance.
