Hundreds of Billions in Losses for Pension Funds Due to 'Cover-ups and Rebates' Corruption

[Financial News] Illegal and improper activities were uncovered in the alternative investment processes of major pension funds and mutual aid associations, as reported on the 27th. Despite causing losses of hundreds of billions of won, attempts were made to cover up issues arising during the investment process, and even corruption involving rebates was revealed.
The Board of Audit and Inspection announced on this day the audit results of the 'Operation and Management Status of Major Pension Funds and Mutual Aid Associations' alternative investments', revealing that several mutual aid associations expanded alternative investments, including real estate, in the 2010s, resulting in large-scale losses. Apart from systemic issues, internal deviant behaviors were detected.
First, in the case of the Construction Workers Mutual Aid Association, Director A introduced an investment in a Spanish logistics center through an acquaintance from an accounting firm in 2019 and executed a fund investment of 30 billion won. In May 2020, A established a corporation he effectively controlled and received 260 million won from a local broker as a consulting fee. In 2021, regarding an investment in Seoul bus transportation companies, he demanded a 40% kickback of the fund management fee from the asset management company. When the company did not comply, he replaced it and pocketed 300 million won.
The money thus obtained was attempted to be disguised as art transactions by registering the asset management company with the Financial Supervisory Service using false documents, but fortunately, the trail was discovered. A corporate associate came forward to testify, and it was also revealed that A's spouse was paid 80 million won as a corporate employee.
Construction Workers Mutual Aid Association Manager B, upon a friend's recommendation, invested 20 billion won in an overseas electric vehicle company in 2021. As of the end of last year, a loss of 16.6 billion won was incurred, but the problem was that the investment was pushed through despite other institutions withdrawing at the time.
In response, the Board of Audit and Inspection requested a prosecution investigation into A in January and sent reference materials for investigation regarding B.
The Military Mutual Aid Association's subsidiary Gongwoo ENC guaranteed a project financing (PF) for a 9.6 billion won electrical construction project of a 71.9 billion won total cost Incheon residential accommodation facility project in 2019. However, as the project was canceled, Gongwoo ENC, which provided the guarantee, took on the repayment responsibility and incurred a loss of 36.7 billion won. Despite the significant loss due to excessive guarantees, the Gongwoo ENC CEO, an alumnus of the Korea Military Academy, and the Military Mutual Aid Association manager tried to cover it up.
The Korea Teachers' Credit Union invested 47 billion won in a U.S. Chicago office mortgage loan bond in 2018, facing the risk of losing the entire amount. This was due to investing in subordinated bonds with a high risk of not recovering the investment if the loan defaulted. At the time, the possibility of major lease contract terminations was omitted from the investment review committee report, resulting in a situation where they were caught off guard.


uknow@fnnews.com Kim Yunho Reporter