FSS Announces Results of Thematic Inspection on Real Estate Trust Companies
Numerous cases of real estate trust companies pursuing private interests, such as mobilizing affiliate employees to resolve unsold inventory of a developer owned by the children of major shareholders of real estate trust companies, have been uncovered.
On the 7th, the Financial Supervisory Service (FSS) announced the results of an intensive inspection titled "Illegal and Unsound Acts Related to Major Shareholders and Affiliates of Real Estate Trust Companies." This inspection was conducted as part of a thematic examination of illegal and unsound acts related to major shareholders and affiliates of real estate trust companies. This follows the continuous detection of employees’ private interest pursuits in securities firms and asset management companies related to real estate project financing (PF).
The inspection revealed private interest pursuits such as △ usurious loans △ bribery △ illicit reduction of unsold inventory △ brokering private loans to developers △ investments using undisclosed information.
Specifically, major shareholders and affiliates of real estate trust companies lent approximately 190 billion KRW over 20 times under the pretext of land funds to developers facing financial difficulties. In this process, they collected about 15 billion KRW in interest. The average interest rate reached a staggering 18% (excluding deferred interest). Furthermore, some contracts included agreements to collect 45% of the development profits attributable to the developer as interest in arrears.
Cases were also uncovered where employees were mobilized to reduce the unsold inventory of a developer owned by the children of major shareholders of real estate trust companies. Approximately 4 billion KRW was lent to about 40 employees of the trust company and its affiliates, who participated in contracts for unsold officetels. As a result, the sales rate increased from 5.5% to 10.2% after lending to employees, and rose further to 36.5% as of March.
The FSS pointed out, "This may constitute a deceptive act against the construction company, which increased the joint guarantee limit for interim payment loans due to the increase in general buyers and sales rates."
Additionally, employees of companies responsible for reconstruction projects used or received undisclosed information obtained during their work to purchase real estate (apartments, villas) to gain development profits. Considering the market prices of newly built apartments near the development sites, it is estimated that they earned development profits worth several hundred million KRW.
The FSS stated, "We will strictly take measures against the illegal and unfair acts of major shareholders and employees confirmed through the inspection in accordance with relevant laws and procedures," and added, "We will actively cooperate with investigations by notifying law enforcement agencies of illegal facts and sharing related evidence."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
