Audit Board: "45 Billion Won in Performance Bonuses for Subsidiary Executives"
According to the audit report released by the Board of Audit and Inspection on the 6th, the Korea Development Bank (KDB) suffered a significant loss of 1.3 trillion won when its restructuring subsidiary KDB Investment (KDBI) sold Daewoo Engineering & Construction. However, KDBI reportedly held a bonus party claiming it earned 700 billion won in profits. The audit revealed that 11 KDBI executives received 4.5 billion won in performance bonuses.
The audit report states that in July 2019, KDB sold its 50.75% stake in Daewoo Engineering & Construction, which it had acquired in 2011 for 3.2 trillion won, to its subsidiary KDBI for 1.4 trillion won.
Subsequently, in June 2021, KDBI conducted a restricted competitive bidding process to sell Daewoo Engineering & Construction. However, when the top bidder requested a re-bid citing media reports about significant differences in bid prices, KDBI unusually accepted the request and proceeded with the re-bid.
The Board of Audit and Inspection pointed out, "KDBI accepted the re-bid and received revised bid proposals despite knowing that the top bidder intended to lower their bid price." It added, "As a result, the final contract was signed at 200 billion won less than the first bid, confirming a loss of 1.3 trillion won for KDB."
Although KDB suffered a massive loss, KDBI claimed a sale profit of 700 billion won over the cost KDB paid to acquire the Daewoo Engineering & Construction stake and received a success fee of 75 billion won. KDBI distributed 4.5 billion won in performance bonuses to 11 executives.
The Board of Audit and Inspection urged KDB, stating, "Despite knowing that the legal and institutional requirements to achieve the establishment purpose were not met, KDB established the subsidiary without preparing alternatives, resulting in failure to operate according to its intended purpose. We demand thorough management of related tasks to prevent such occurrences." It also notified KDB to devise measures to strengthen management and supervision to ensure KDBI diligently handles restructuring sales tasks.
Additionally, the Board of Audit and Inspection demanded disciplinary action (dismissal) against the former head of the Cheongju branch of KDB, who caused a loss of 11.3 billion won by colluding with loan brokers to manipulate loan screenings and improperly providing special COVID-19 funds, resulting in 11.2 billion won in loans to insolvent companies. The audit also uncovered that the branch head requested seven companies that received loans to hire his son and daughter.
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