Probe of Korean ferry mogul uncovers suspect bank loans

Probe of Korean ferry mogul uncovers suspect bank loans
A student prays during a candlelight vigil to commemorate the victims of the sunken passenger ship Sewol and to wish for the safe return of missing passengers, in Ansan April 27, 2014.

Yoo Byung-eon, the de facto owner of the sunken ferry Sewol, is believed to have been given 22 billion won (S$26.9 million) in favourable loans from multiple lenders, the nation's financial watchdog said amid a widening probe into irregularities behind the operations of the disastrous vessel.

Yoo reportedly received 12.8 billion won worth of loans approved by the National Agricultural Cooperative Federation, or NongHyup, in 2007 without collateral and proper scrutiny, which is almost impossible in corporate lending in Korea.

The Industrial Bank of Korea also approved some 9.5 billion worth of loans to Yoo, according to data from the Financial Supervisory Service.

The former chairman of Semo Group is believed to have used the illegal loans to reacquire a majority stake in Semo Co., the parent company of the now-defunct company.

The news came amid widening probes into irregularities by the Sewol's operator Chonghaejin Marine.

Financial regulators are reportedly widening their probe into the owners and operators of the capsized ferry.

The financial watchdog on Friday launched a special probe into Semo Co. and its affiliates of the Sewol's operator. The authority is looking into the status and problems of loans extended to I-One-I Holdings, a holding company associated with Semo Group, as well as lending to 13 sister companies.

I-One-I Holdings holds the largest stake in Chonghaejin Marine, the operator of the sunken ferry. Yoo's two sons ― Dae-gyun and Hyeok-gi ― are the two largest shareholders of I-One-I Holdings.

"The regulators will further investigate allegations that several major banks and other financial firms to determine whether companies owned by Yoo and his family were given illegal loans," a source close to the investigation said.

The FSS said it would also look into details of overseas transactions and other financial activities by Yoo and his family.

Meanwhile, prosecutors looking into the sinking of the Sewol on Saturday raided the accounting offices of Chonghaejin and its affiliates. The Incheon District Prosecutor's Office said that its special investigation team secured computer files and other records in the raid.

The team has already summoned Yoo's younger son and daughter, and is reportedly preparing to summon the 73-year-old for questioning.

Last week, prosecutors also raided the homes of Yoo and his family as well as Chonghaejin and its affiliates' offices.

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