The prosecution on Wednesday confirmed that 1.282 trillion won ($1.1 billion) from four now-closed savings banks was misappropriated by management and major shareholders.

The investigators have decided to confiscate 332.7 billion won and indict 25 key figures responsible for corruption in addition to the indicted chairmen of Solomon, Mirae Mutual, Hanju and Korea savings banks.

According to the Supreme Prosecutors’ Office, management at the banks arranged illegal loans as well as embezzled and abused the money for personal use.

Mirae Mutual Savings Bank Chairman Kim Chang-kyong has been arrested for arranging illegal loans worth 380 billion won from his own bank in order to purchase and operate a golf course in Asan, South Chungcheong Province under a borrowed name.

Lim Suk of Solomon ordered his staff to arrange a 29.2 billion won loan for another company he runs, while Yun Hyun-soo of Korea Savings Bank borrowed 21.1 billion won without legitimate procedures to buy a resort facility in Japan.

Alongside the irregularities, 117.9 billion won was siphoned off by major shareholders, the officers said.

They created borrowed-name accounts for illegal loans, exaggerated construction fees and pocketed expensive art pieces.

“While many irregularities of savings banks that have been shut down by the government in the past were committed in order to cover up inappropriate investment in special-purpose companies, this corruption was more personal,” Choi Un-shik, head of the special investigation unit of the prosecutors’ office, said.

The prosecutors managed to trace the whereabouts of 332.7 billion won in assets believed to be part of the slush funds and directed the Korea Deposit Insurance Corporation to confiscate the assets. The public agency will liquefy the money and redistribute it to the defunct banks to pay off their account holders.

The four troubled banks were suspended on May 6 after they were revealed to have failed to meet the regulators’ standard for financial strength.

The four are the latest in a slew of savings banks that have been shut down after irregularities at Busan Savings Bank were detected last year.

Prosecutors said they will dig into whether the management had lobbied political and financial figures in order to evade closure. 

By Bae Ji-sook (baejisook@heraldcorp.com)