[비즈한국] Recently, the sanctions for those responsible for the recent private equity fund scandal in the financial sector have taken shape. As the level of disciplinary action against heads of financial firms involved in the private equity scandal is decided and the payment of fines and refunds of investment principal becomes inevitable, the companies are expected to take a significant hit. Now, the market is turning its attention to the National Pension Service (NPS). The focus is on whether the NPS, which holds large stakes in these companies, will initiate shareholder derivative lawsuits. If such lawsuits proceed, they are expected to impose a heavy burden on the executives who caused losses to their respective companies.
According to Article 21, Paragraph 1 of Chapter 4 (Filing of Lawsuits) of the 'Guidelines on Stewardship Responsibilities of the National Pension Fund', the NPS may file a lawsuit holding directors liable if a company has suffered losses due to its directors, yet the company fails to hold them accountable.
If the company fails to file a lawsuit within 30 days of receiving a request under Paragraph 1, the NPS may file a shareholder derivative lawsuit in accordance with Article 21, Paragraph 2. Through this, it can seek damages and other remedies.
For this reason, eyes are on the directors of financial firms who have been subject to disciplinary measures and fines due to the mis-selling of private equity funds, including last year's Derivative Linked Fund (DLF) scandal, the Lime Fund scandal, and the Optimus scandal. Son Tae-seung, Chairman of Woori Financial Group 316140, received a disciplinary warning from the Financial Supervisory Service (FSS) last March due to insufficient internal controls regarding the DLF. The company was fined 19.71 billion won.
The levels of sanctions consist of 5 stages: caution, cautionary warning, disciplinary warning, suspension of duties, and recommendation for dismissal. Caution and cautionary warning are considered minor, while receiving a major sanction, such as a disciplinary warning or higher, restricts future employment. A disciplinary warning prohibits re-employment for 3 years, suspension of duties for 4 years, and recommendation for dismissal for 5 years.
Chairman Son Tae-seung also received a disciplinary warning from the FSS regarding the suspension of redemptions for the Lime Fund. Woori Bank accepted a mediation proposal to return 100% of the investment principal for the Lime Trade Finance Fund, returning the full 65 billion won in sales. For other funds with delayed sales, 51% of the principal was paid back.
Consequently, it appears that Chairman Son Tae-seung caused losses to the company throughout the Lime and DLF scandals. Therefore, attention is focused on whether the NPS, which holds a 9.8% stake in Woori Financial Group, the holding company of Woori Bank, will initiate a double derivative lawsuit (a lawsuit where shareholders of a parent company hold the subsidiary's directors liable on behalf of the subsidiary).
At Hana Bank, Ham Young-joo, Vice Chairman of Hana Financial Group 086790, also received a disciplinary warning from the FSS last March for inadequate internal controls regarding the DLF. The fine amounted to approximately 16.78 billion won. The NPS holds a 9.88% stake in the holding company, Hana Financial Group, and could potentially initiate a shareholder derivative lawsuit.
Shinhan Financial Group, in which the NPS holds a 9.81% stake, and its subsidiary Shinhan Bank are also unlikely to avoid major sanctions regarding the Lime scandal. Relevant sanction reviews are currently underway, and Shinhan Bank CEO Jin Ok-dong has been notified in advance of a disciplinary warning from the FSS. Cho Yong-byoung, Chairman of Shinhan Financial Group, was given a preliminary notice of a cautionary warning, which is a minor sanction. As it is expected that up to 80% of the investment principal will be returned to the victims of the Lime Fund, the losses for Shinhan Financial Group appear significant. This is the point where the need for a shareholder derivative lawsuit by the NPS is being raised.
Sanction proceedings by the Financial Services Commission are also underway against another subsidiary of Shinhan Financial Group, Shinhan Investment Corp., regarding the Lime scandal. While former CEOs Kim Hyung-jin and Kim Byung-chul have received suspensions of duty and cautionary warnings respectively from the FSS, the company has been fined (the specific amount was not disclosed). Accordingly, attention is turning to whether the NPS will embark on a shareholder derivative lawsuit.
Former KB Securities CEO Yoon Kyung-eun and current CEO Park Jeong-rim, subsidiaries of KB Financial Group 105560 (where the NPS holds a 9.93% stake), are also not free from the NPS's judgment regarding the Lime scandal. In relation to the scandal, former CEO Yoon Kyung-eun received a suspension of duty, and CEO Park Jeong-rim received a disciplinary warning. As the company is also expected to be fined, the NPS's deliberation on a shareholder derivative lawsuit seems to be deepening.
Regarding IBK 024110 and the Lime and Discovery scandals, the FSS has decided on sanctions where former CEO Kim Do-jin received a cautionary warning and the company was fined. The role of the NPS, which holds a 6.91% stake in IBK, is also being raised simultaneously.
An NPS official explained, "There are no specific plans for shareholder derivative lawsuits regarding the financial sector's private equity scandal," adding, "We are currently monitoring the situation."
An official from the Economic Reform Solidarity stated, "If the NPS files a shareholder derivative lawsuit against responsible directors of an investee company that has suffered damage to its corporate value, or participates as a plaintiff in such a lawsuit, it would be of great help not only in enhancing corporate value but also in improving the returns of the National Pension Fund."