Monday, January 30, 2012

Foreign ministry raided over diamond scandal

Prosecutors raided the Ministry of Foreign Affairs and Trade Monday seeking evidence in a stock price rigging scheme involving senior diplomats and a local firm developing a diamond mine in Cameroon.

The Seoul Central District Prosecutors’ Office sent investigators to the headquarters of the foreign ministry in downtown Seoul at around 10 a.m. Monday, confiscating computer hard discs and confidential documents from the office of Ambassador for Resources Kim Eun-seok.

Kim is suspected of having played a key role in inflating stock prices of KOSDAQ-listed CNK International with a press release based on deliberately exaggerated data on the mine’s value in December 2010.

Investigators also searched the ministry’s public relations’ office and seized computer files and official records.

It was the first time the foreign ministry has been raided and searched by investigators in the country’s history. The residence of Ambassador Kim was also raided.

The prosecution said investigators tried to secure diplomatic correspondence exchanged between the ministry headquarters and the Korean Embassy in Cameroon.

``We decided to raid the foreign ministry, instead of asking it to voluntarily hand over relevant documents. When we look into the official correspondence between the ministry and the Korean Embassy in the African country, we will have a better idea about how to proceed with the investigation,’’ a prosecution official said.

The raid came four days after the Board of Audit and Inspection (BAI) announced the results of its months-long inspection into the stock price manipulation scandal centered on Kim and controversial mineral developer CNK International.

BAI said Kim pressed the ministry to issue a press release on Dec. 17, 2010, with deliberately exaggerated data that CNK had won the right to develop a diamond-rich mine in the African nation.

The press release, based on Kim’s data, said the mine in Yokadouma, 520 kilometers east of Cameroon’s capital Yaounde, had an estimated 420 million carats worth of diamonds, more than twice global diamond production. CNK’s stock price skyrocketed immediately after the issuance of the press release.

The agency said the amount of diamonds buried there was estimated at one seventeenth of that made public, citing its on-site inspection and interviews with mine experts. BAI then demanded the ministry dismiss Kim for pocketing illegal profits by helping manipulate the CNK stock price, while referring the case to the prosecution for criminal investigation.

Last Thursday, prosecutors also raided CNK headquarters in Seoul, and the homes of the firm’s chairman, Oh Deok-kyun, and former Vice Foreign Minister Cho Joong-pyo among others. Cho served as the firm’s advisor after retiring from his government post.

``We are positive that the Dec. 17 press release caused CNK share price to soar and Ambassador Kim was behind the share-price rigging scam,’’ the prosecution official said. ``Kim is suspected of having leaked information to his family members and relatives before the public release of the news so that they could earn huge illegal gains by purchasing CNK shares.’’

According to the prosecution, Kim told his family members in January 2009 about CNK’s business in Cameroon. Two of his brothers and several relatives bought and sold CNK shares over the past two years, realizing tens of millions of won in capital gains.

Kim’s secretary was also found to have invested in CNK shares from August 2010 and earned 35 million won in capital gains.

The official said investigators have been persuading CNK chairman Oh, suspected of earning over 80 billion won from insider trading, to return home as soon as possible to face questioning. Oh left the country last October for Cameroon.

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