Thursday, June 9, 2011

Government Official Admits to Taking Money, But Denies Bribery

Korean Banking System
A former inspection commissioner at the Board of Audit and Inspection, which is tasked with ensuring financial propriety in the banking sector, has admitted accepting money from the now suspended Busan Savings Bank, but said it wasn't a bribe. "They just gave it to me" said 54 year-old Kim, explaining how he went to the bank one day in the course of his job and was shown a drawer full of cash which the manager said he was giving away because 'there was no space for it in the bank vault'.

With arrest warrants about to be issued, defense attorneys are expected to argue that money given freely by failing banks to government auditors can only be classed as bribery if anything is asked for in return. However, in this case there appears to be some evidence that Kim exchanged e-mail and Prada smartphone messages with the bank's major shareholders to prevent the failing bank from being suspended.

Before its collapse, Busan Savings Bank was known for its generosity, saying it paid savers rates of 8% - 4% above the Korean base rate - "because it cared". However, less generously, some have accused the bank of being part of a massive pyramid scheme which involved taking money from customers, with the promise of extraordinarily high interest rates, to fund construction companies at even higher rates of interest that were building apartments for customers that no longer wanted to buy them - because they were earning so much interest on their money in Busan Savings Bank.

The scheme eventually collapsed when nobody was left to pay the inflated apartment prices the construction companies needed to ask for due to the high loan rates, and now vast swathes of apartment blocks stand empty, mainly sold to investors outside Busan who haven't realized that the population of Korea's second-class city is declining and Realtors have taken to placing dummies in apartment windows to create the illusion of habitation.

Busan Savings Bank was one of several financial institutions that had to be suspended by the Financial Services Commission earlier this year, and many of them are believed to have generously donated free money they didn't have space for to government officials and politicians, who have sought to characterize the payments as 'token appreciations for all the honest hard work we do'. However, when the Criminal Investigations Unit of the Supreme Prosecutor's Office started to look into the payments, lawmakers voted to abolish it for wasting taxpayers' time.

Under a banner reading "No corruption in Korea", a government spokesman said that levels of bribery were very low compared with several other countries, although if anyone could persuade him otherwise he might be willing to accept it.

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