[Their Own League, Regional Banks] ① How Did the Banker Known as the 'God of Work' Become a 300 Billion Won Embezzler?

‘A god-like figure who is difficult to approach when it comes to work.’

This was the evaluation inside and outside the bank of Lee, the former head of the Investment Finance Department at BNK Gyeongnam Bank (51), who was involved in the 300 billion KRW real estate project financing (PF) embezzlement case uncovered in July this year. He was said to be an unparalleled talent within the bank, having managed PF loans and loan repayments for 15 years, but he became an embezzler who shocked not only the entire financial sector but also Korean society.

Lee, originally from Seoul, joined Gyeongnam Bank in 1990 as a high school graduate and has worked there for 33 years as a veteran banker. Since being appointed head of the Real Estate Finance Team in 2007, he was promoted to head of the Investment Finance Planning Department this year, handling real estate PF loan contracts and loan management for about 15 years and 5 months. Lee was regarded as a highly competent and trusted banker within Gyeongnam Bank. A local financial sector official explained, “(Lee) was considered an outstanding senior who was difficult to approach professionally within the bank,” and “even when the incident first became known, people said it was ‘hard to believe at all’ because he was so highly trusted.”

He was reportedly the type who earned goodwill from those around him through his expertise and unique kindness. At the end of the month, when work piled up, he would personally step in to ease the workload of his juniors, and he often gave generously to those around him based on his ample financial resources. How then did he come to commit an embezzlement case amounting to approximately 300 billion KRW?

Started Embezzlement Within a Year of Appointment... Embezzled Again to Cover Up the Incident

According to the indictment obtained by Asia Economy through the National Assembly on the 19th, Lee committed his first embezzlement in late July 2008. Since he began working as head of the Real Estate Finance Team on December 24, 2007, he started embezzling in just over seven months.

The incident began as follows. At that time, Lee, who was in charge of PF at Gyeongnam Bank, was managing 20 billion KRW loaned by the lending group for a golf course development project promoted by developer Company A in Eumseong-gun, Chungbuk Province. Between July and August 2008, he embezzled 5 billion KRW. Lee transferred the embezzled funds through the account of his brother-in-law to accounts under the names of his wife, sister-in-law, and younger brother, starting a nominee investment via his accomplice, Hwang (52), an employee of a major securities firm. Subsequently, Lee embezzled 18.6 billion KRW from this project alone until the end of January 2014.

However, the investment results using the embezzled funds were disappointing. By the end of January 2014, Lee recorded investment losses amounting to 5.59 billion KRW. The scale of embezzlement grew significantly from this point. To recover the large investment losses and replenish the arbitrarily embezzled funds, Lee began to tamper with other PF projects under his management.

A real estate project financing loan embezzlement incident involving approximately 56 billion KRW occurred at BNK Gyeongnam Bank. The photo shows a BNK Gyeongnam Bank branch in downtown Seoul on the 3rd. Photo by Jinhyung Kang aymsdream@

Falsified Documents to Embezzle Loan and Loan Principal Repayment Amounts

The methods were generally similar. He embezzled loan funds from various PF projects or manipulated documents to divert repayment amounts paid by developers or trust companies as loan principal and interest repayments, transferring the money to accounts of paper companies established under the names of Lee, Hwang, and Lee’s wife, planning further investments. Typically, in PF projects, the lead bank holds the passbook to prevent unauthorized use of loan funds, which Lee exploited.

In the case of a joint housing project in Gwangjin-gu, Seoul, around 2016-2017, Lee used the corporate seal and representative’s nameplate of project company B (a special purpose company) that he had kept in advance to create false withdrawal slips and handed them to Hwang. Hwang impersonated a B company employee at a Gyeongnam Bank branch and embezzled loan principal and interest repayments sent by trust company C, transferring the funds to family and paper company accounts. The embezzled amounts ranged from about 100 million KRW to as much as 7.7 billion KRW at times.

Similar methods were used in projects in Uiwang and Uijeongbu. In Uiwang, Lee embezzled loan principal and interest repayments paid by trust company E, which had a PF contract with developer D. Lee first opened two accounts under D’s name, exploiting the fact that two accounts could be opened with one account transaction application. He then prepared multiple false withdrawal slips, and Hwang, impersonating a D company employee as before, embezzled about 19.4 billion KRW over several occasions.

He also exploited remaining loan limits. Regarding a project in Gwangju, Gyeonggi Province, Lee forged account transaction applications, project fund withdrawal requests, and withdrawal slips using the corporate seal he arbitrarily kept, taking advantage of the approximately 37.5 billion KRW loan limit remaining for developer F’s association. Lee embezzled about 78.9 billion KRW from loan and loan principal repayment amounts related to this project. They even meticulously agreed to answer “land price” when bank tellers asked about the purpose of the remittance at the bank counter.

In Uijeongbu, Lee executed false loans, taking advantage of the approximately 65 billion KRW loan contract limit remaining for special purpose companies G and H established by the developer. This was to repay the embezzled funds related to the F association mentioned earlier. Lee created false loan withdrawal notices and loan execution requests using his laptop. He gave these false documents to junior employees unaware of the facts and had them draft work processing requests to execute the loans. The loan funds generated by the false loans were transferred to Lee’s paper company accounts under the name of construction costs.

A financial sector official said, “Since the perpetrator was classified as a PF expert within the bank and was a trusted figure, subordinates probably did not have significant doubts or, even if they did, it would have been difficult to raise objections,” adding, “Looking back, the acts of helping with work might have been to conceal his crimes.”

The Financial Supervisory Service estimates the total embezzled amount to be 298.8 billion KRW across 17 projects. Of this, 102.3 billion KRW was embezzled through loan fund misappropriation in five projects over 13 occasions, and 196.5 billion KRW was embezzled through loan principal and interest repayment funds in 16 projects.

A real estate project financing loan embezzlement incident involving approximately 56 billion KRW occurred at BNK Gyeongnam Bank. The photo shows a BNK Gyeongnam Bank branch in downtown Seoul on the 3rd. Photo by Jinhyung Kang aymsdream@

Embezzlement Discovered by Chance... Hid Escape Funds and Attempted Overseas Flight

Lee’s crimes were revealed by chance. The Korea Deposit Insurance Corporation discovered suspicious circumstances related to a failed PF project while claiming subrogation rights on bonds of savings banks that went bankrupt around 2012. The KDIC requested an investigation into Lee by the prosecution, and as financial account seizures began, Gyeongnam Bank and financial authorities gradually became aware of the case.

Lee was placed on standby leave in mid-April and suddenly disappeared around July when the Financial Supervisory Service’s inspection began. His disappearance was meticulous. He moved between Sacheon, Daegu, Gangneung, Hanam, and Seoul to evade the investigation, and during his flight, he secretly rented three officetels in Gangnam and Songpa districts of Seoul and Hanam, Gyeonggi Province, under false names as hideouts. At each hideout, he concealed about 4.6 billion KRW in cash, 50,000 USD, 40 million KRW worth of gift certificates, and 101 gold bars weighing 1 kg each (worth about 10.1 billion KRW).

Further investigation revealed signs that Lee planned to flee overseas. Prosecutors tracking the hidden assets found that Lee had sent 550,000 USD (about 700 million KRW) to the U.S. under the pretext of investment immigration funds, planning to immigrate to the U.S. The court approved a provisional seizure order to freeze the amount.

A financial sector official said, “Looking at this case, most of the PF projects involved in the embezzlement appeared to be proceeding normally on the surface, so it would have been difficult for outsiders to detect, though it was bound to surface eventually,” adding, “However, most embezzlers anticipate that their crimes will eventually be uncovered and prepare countermeasures. The perpetrator likely planned meticulously with this in mind.”

Another local financial sector official said, “Other regional banks have at least three to four specialists related to PF loans, but in the case of Gyeongnam Bank, Lee was almost the only one,” adding, “The problem was the high dependence on a single individual.”