[비즈한국] “The investigation began after the Financial Supervisory Service (FSS) handed over materials, but former Woori Financial Group316140 Chairman Son Tae-seung has not yet been summoned for questioning. The crux of the case will be how much they can prove that the failure to recover the loans constitutes ‘breach of trust,’ and whether they can prove that the chain of responsibility leads all the way up to former Chairman Son Tae-seung.” (Legal circles insider)
On the 31st of last month, the warrant-dedicated court of the Seoul Southern District Court issued an arrest warrant for a former vice president of Woori Bank, surnamed Seong, who is facing charges of breach of trust under the Act on the Aggravated Punishment, etc. of Specific Economic Crimes, citing concerns over evidence destruction and flight. This means the investigation, which originated from the FSS’s inspection results revealing 35 billion won in improper loans provided to corporations or individual businesses related to former Chairman Son Tae-seung’s brother-in-law, has now reached the doorstep of Son himself.
Started with FSS materials, but
The Seoul Southern District Prosecutors' Office Financial Investigation Division 1 (Chief Prosecutor Kim Soo-hong) launched the investigation after receiving findings from the FSS that Woori Bank had issued 60 billion won in loans to corporations or businesses related to former Chairman Son’s relatives between April 2020 and January of this year, with 35 billion won of that amount deemed to be improper loans.
According to the FSS and the prosecution, former Chairman Son and other executives are suspected of directing or being involved in the 35 billion won in improper loans while working at the Woori Bank headquarters between 2020 and 2022. On September 24, the former Chairman's brother-in-law, Mr. A, was already arrested and indicted on charges including embezzlement and forgery of private documents under the Act on the Aggravated Punishment, etc. of Specific Economic Crimes, and on the 15th of last month, a former Woori Bank division head, surnamed Im, was also arrested and indicted for breach of trust and accepting bribes under the same act. On the 11th of last month, a search and seizure was conducted on former Chairman Son’s residence and other locations.
Today (the 18th), authorities initiated a compulsory investigation of the Woori Bank headquarters. The offices of the Woori Bank President, the Woori Financial Group Chairman, and departments related to loans at the Woori Bank headquarters were included in the search and seizure.
Within legal circles, there is speculation that the purpose of this operation is to secure evidence with a view to summoning former Chairman Son Tae-seung. A legal expert familiar with the case explained, “I understand that neither the former vice president nor the division head had a series of contacts with then-Chairman Son Tae-seung during the loan process. It seems they are conducting the search and seizure to find additional evidence, as currently, they have only confirmed that special benefits were provided because they were relatives.”
Failure to repay a loan equals breach of trust?
Legal professionals explain that the focus must be on whether the “bank’s failure to recover a loan is illegal.” They argue that for charges of breach of trust to stick, the prosecution must prove two things: first, that it was foreseeable that the loan could not be recovered, beyond a simple violation of regulations; and second, that there was an explicit directive from former Chairman Son to “grant the loan even if it means taking risks.”
An attorney who previously served as a high court presiding judge pointed out, “If a bank grants a loan but cannot recover it fully because interest payments aren't met, does that make all related employees guilty of breach of trust? It must be proven that a decision was made even in a situation where losses to the company were anticipated. Because there are ambiguous aspects to judicial processing in such cases, many financial companies resolve these matters through ‘internal disciplinary action.’”
For this reason, observations suggest that it will take at least another week before a summons for former Chairman Son is issued. A prosecutor-turned-lawyer predicted, “It takes about a week to forensically analyze the digital materials secured during the search and seizure. The prosecution will only proceed with summoning and requesting an arrest warrant for former Chairman Son once they secure evidence of his approval or improper directives issued through internal communication channels.”
The FSS shaking up Woori Financial?
Some suggest that the FSS is attempting to pressure Woori Financial by leveraging the judicial risks surrounding former Chairman Son. The interpretation is that they are using internal Woori Financial issues as a basis to shake the standing of current Woori Financial Group Chairman Im Jong-ryong.
Indeed, when the improper loan scandal involving former Chairman Son Tae-seung’s relatives broke out last June, the FSS moved up the date for the regular inspection, which was originally scheduled for next year. Regular inspections are typically conducted on a three-year cycle. Furthermore, the inspection, which was originally set to end on the 15th, was extended by a week. By making an issue of recurring financial accidents, they are conducting high-intensity inspections of the current management as well.
In the financial sector, there is also talk that FSS Governor Lee Bok-hyun is trying to demonstrate his “presence” by making an issue of Woori Financial Group Chairman Im Jong-ryong. A legal expert who worked in a financial institution until recently hinted, “FSS Governor Lee Bok-hyun, a former prosecutor, is pressuring Chairman Im Jong-ryong, a ‘Mofia’ (finance mafia) figure from the Ministry of Economy and Finance, using the ‘CEO responsibility’ narrative. To properly understand this case, which began with former Chairman Son Tae-seung, one must also look at the power struggle between the former prosecutors and the Mofia.”