[Exclusive] Inside the 88.2 Billion Won IBK Loan Scandal: Faked Major Corporate Deals and Manipulated Credit Ratings

Former Employee and Real Estate Developer Indicted and Detained
Fabricated Company Profiles and Provided Money to Loan Officer for Favorable Treatment
Former Credit Review Center Head Accused of Manipulating Credit Evaluations for Improper Loans
Evidence of Continued Bribery Even After FSS Inspection

The prosecution, while investigating the 88.2 billion won improper loan case at IBK Industrial Bank of Korea, has uncovered additional charges beyond those revealed by the Financial Supervisory Service's inspection results. Former IBK employee and current real estate development company CEO, identified as Mr. Kim, was found to have provided large sums of money to a loan officer in exchange for loan facilitation, and to have obtained improper loans by fabricating company introductions. In the case of former IBK Credit Review Center head, identified as Mr. Cho, it was found that he manipulated credit evaluations to approve requested loans and accepted money and valuables in connection with improper loans. Evidence also suggests that items received as bribes were used even after the bank's internal audit and the Financial Supervisory Service's inspection.

"Kim Acted as a Loan Broker and Collected Commissions"... Falsified Company Introductions and Colluded with Spouse

According to the indictment submitted by the Ministry of Justice to Democratic Party lawmaker Park Heeseung's office on the 31st, the prosecution indicted Kim and Cho, along with three branch managers who joined the bank in the same year and Kim's spouse, identified as A, who was a team leader at the IBK Credit Review Center, on charges of illegally approving a total of 35 billion won in loans to Kim-related corporations on 21 occasions from January 2022 to November last year. Although the amount of improper loans is less than the 88.2 billion won estimated by the Financial Supervisory Service when it requested the prosecution's investigation, the prosecution uncovered that Cho, in collusion with an acquaintance, approved an additional illegal loan of approximately 1.8 billion won.

On April 28, a current employee of Industrial Bank of Korea appeared at the Seoul Central District Court in Seocho, Seoul for a pretrial detention hearing. Photo by Yonhap News

Kim was found to have brokered loans for his own corporation and acquaintances in exchange for compensation. At the request of a construction company that owned 25 unsold commercial units in Siheung, Gyeonggi Province, Kim allegedly brokered a loan of 11.8 billion won through his peers, Cho and three branch managers. The prosecution determined that Kim collected 2.86 billion won as a commission for acting as a sales agent in this process. When an acquaintance he met at IBK planned to purchase land in Hadong, Gyeongnam and build a commercial building, Kim allegedly promised to receive up to 1.3 billion won for arranging a facility loan of 7.5 billion won.

Kim is also accused of colluding with his spouse, A, to facilitate an additional 1.5 billion won loan for the same acquaintance's commercial building project. A is accused of approving the 1.5 billion won working capital loan without properly verifying supporting documents or assessing repayment ability, at Kim's request.

The prosecution also found that Kim paid 700 million won to a loan officer (working at the same center as his spouse, A) who facilitated business loans for Kim's real estate-related corporation. Kim also falsified company introductions to secure a total of 500 million won in working capital loans. Specifically, he sought additional loans to prepare funds for further payments to the loan officer and to repay loans from other corporations. Kim submitted a fabricated company introduction as supporting documentation, falsely claiming his factory covered 1,000 square meters, that he was engaged in manufacturing electronic circuit boards, and that he expected tens of billions of won in sales through transactions with HL Mando and Hanwha. In addition, Kim is accused of creating multiple corporations, registering fake employees, and withdrawing salaries paid under their names for personal use, constituting embezzlement.

Prosecution Uncovers Additional 1.8 Billion Won in Illegal Loans Beyond FSS Notification

In Cho's case, it was newly revealed that while serving as branch manager in Seo-gu, Incheon in 2021, he instructed an acquaintance to establish a new corporation and facilitated a refinancing and additional loan totaling 1.8 billion won. During this process, the branch manager of a bank in Seongdong, Seoul, under Cho's direction, instructed a loan officer to process the loan and, despite knowing the company's financial situation, manipulated the non-financial score in the credit evaluation to achieve a BB+ rating. Subsequently, following Cho's instructions, the Credit Review Center approved the loan by upgrading the credit rating by two levels to BBB+.

On March 26, at the expanded executive meeting held at the IBK headquarters, Kim Sungtae, president of IBK, announced an apology statement and a renewal plan. IBK

Cho mainly received compensation for loans through his sister-in-law. For the unsold commercial unit loan, he received 12,000 shares worth 60 million won in a related corporation. For a loan to an acquaintance he befriended through a private gathering, he installed his sister-in-law as the company’s CEO and received approximately 90 million won in salary, which he used personally. He is also accused of using a corporate credit card issued in the name of the acquaintance's company. After the IBK internal audit and FSS inspection began, Cho claimed to have lost the card and requested another corporate card, using approximately 96 million won until early February of this year. Upon learning that the acquaintance’s corporate overdraft account had a remaining balance of 50 million won, he demanded 50 million won in cash. In December last year, after being placed on standby due to the loan incident and experiencing a reduction in salary, he again demanded 50 million won from his sister-in-law’s severance pay as an interim settlement. When the internal audit prevented him from using his company vehicle (Kia EV6), he received a Hyundai Grandeur from Kim and used it until February this year.

Meanwhile, the process by which IBK became aware of the improper loan incident has also been revealed. In August last year, the bank's audit department received a tip-off about Kim's misconduct in the unsold commercial unit loan process and launched an investigation. At the end of November, a comprehensive audit was conducted at a branch in Gangdong, Seoul, and on December 2, the bank reported to the FSS, accusing the branch manager of supporting improper loans for unsold real estate and violating the code of conduct, and reported the incident as a financial crime. In addition, special audits were conducted at the Credit Review Center and two branches in Seongdong, Seoul, with interim reports submitted to the FSS.