The police raided two foreign securities firms, including Nomura Securities, early this month in connection with the allegations that they provided hospitality and entertainment to officials of Export-Import Bank of Korea (Eximbank) in exchange for being selected as lead managers for the bank’s issuance of foreign currency-denominated bonds. The police have been conducting confidential inquiries into the allegations before launching a formal investigation.
The probe, which is being carried out by the sophisticated crime investigation division of the Seoul Metropolitan Police Agency, was triggered by the Board of Audit and Inspection (BAI), which discovered irregularities during its audit of Export-Import Bank of Korea.
The BAI reprimanded and cautioned the Eximbank in July when it found that the bank had singled out lead managers ahead of drafting the evaluation documents. Normally about five securities firms are selected as lead managers. The state-run bank was found to have arbitrarily selected two of the five in advance and then selected the remainder based on an evaluation of their proposals.
The BAI suspected that the Eximbank committed corruption in issuing foreign currency-denominated bonds worth 25.9 trillion won (US$22.2 billion) on 17 occasions from 2014 to December 2018. It paid a total of 76.8 billion won (US$65.8 million) in management fees to lead managers over the given period. The state-run bank has yet to be investigated.
The police have reportedly secured circumstantial evidence that Eximbank officials who attended investment briefing sessions in New York, London, and Hong Kong were improperly entertained by foreign securities firms.