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Photo: KDB Industrial Bank |
[Alpha Biz= Paul Lee] The Board of Audit and Inspection (BAI) has revealed that Korea Development Bank (KDB) suffered a $61.34 million loss after pushing ahead with an investment despite credit risk concerns surrounding China’s HNA Group.
During the 2021 sale of Daewoo Engineering & Construction, KDB effectively reduced the acquisition price by 200 billion won at the request of Jungheung Construction, resulting in a total loss of 1.3 trillion won for the bank. Meanwhile, executives at KDB’s subsidiary reportedly awarded themselves hefty performance bonuses despite these losses. Additionally, illegal lending practices and project financing (PF) fraud involving some employees were uncovered, leading to criminal referrals by the BAI.
On Thursday, the BAI released an audit report focusing on KDB’s mismanagement of policy funds and identified 20 instances of legal or procedural violations. In particular, KDB’s restructuring subsidiary, KDB Investment (KDBI), conducted a second bidding process for the Daewoo sale after Jungheung Group, the initial highest bidder, complained that its bid of 2.3 trillion won was excessively high compared to DS Network Consortium’s 1.8 trillion won. The BAI found that KDBI had engaged in an unfair bidding process in consultation with Jungheung, ultimately allowing the group to secure Daewoo for 2.067 trillion won—just slightly above DS Network’s revised 2 trillion won bid.
KDB had injected more than 3.2 trillion won into Daewoo through debt-to-equity swaps but only recovered 1.9 trillion won through the sale, confirming a 1.3 trillion won loss. Despite this, KDBI justified awarding itself a 75 billion won success fee, claiming it had achieved a 700 billion won profit based on its own purchase price from KDB (1.4 trillion won). Out of this amount, 4.49 billion won was distributed as performance bonuses to 11 executives, with the highest payout reaching 1.617 billion won per individual, averaging 408 million won per person.
While the BAI criticized these transactions as unfair business practices, it did not conclude they were illegal. It has since instructed the KDB chairman to strengthen oversight and ensure that KDBI properly executes restructuring and asset sales in the future.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
