Harvest Scandal
Deputy Prime Minister and Minister of Strategy and Finance Choi Kyung-hwan said on Oct. 24 that he had received no reports at all from former Korea National Oil Corporation (KNOC) President Kang Young-won with regard to the KNOC’s acquisition of Harvest, and thus was not responsible for the matter.
“I met with the president on repeated occasions as the former Minister of Knowledge Economy, but never talked about the acquisition of the Canadian company,” he said at the parliamentary inspection of the Ministry of Strategy and Finance. On the preceding day, however, former President Kang testified at the parliamentary inspection of the Ministry of Trade, Industry and Energy that he had briefed the former Knowledge Economy Minister in advance on the takeover of Harvest and North Atlantic Refining Limited (NARL), and the latter had given a green light. “I admit that the KNOC pushed ahead with the acquisition beyond its capability,” he apologized.
The KNOC took over Harvest and its subsidiary NARL five years ago. However, the acquisition has incurred losses of over 100 billion won each year, and the corporation recently decided to sell NARL at a price of 90 billion won (US$85 million). NARL had been purchased at a cost of 1 trillion won (US$950 million).
“It is a stretch of authority for a minister to try to allow or prohibit a project of a state-run enterprise, and overseas natural resources development, which takes time, should be seen with a long-term perspective,” the Deputy Prime Minister explained at the inspection, continuing, “I might have some moral responsibility as a former minister for the failure of the development project led by the government, but it is wrong to hold an individual accountable for the failure.” An opposition party lawmaker refuted this statement by saying that he was the one who coordinated the takeover. The Deputy Prime Minister responded by saying, “At that time, countries around the world were scrambling for energy sources with the international oil price estimated to reach US$200 or something, and what could I do with the Korean government trying not to fall behind?”
“Power-related Corruption Scandal”
He also mentioned that what former KNOC President Kang said on the previous day was not the way a minister grants his or her approval and, in addition, such talks had never happened between them. “The KNOC Act stipulated no specific details as to the corporation’s acquisition of an oil refining company, and I thought I had to seek advice from the Ministry of Knowledge Economy. The minister said that I can decide on the progress after some thorough review,” the former president said on Oct. 23. “The approval of any national project is to be made in writing, not by word of mouth,” the Deputy Prime Minister responded the next day.
In the meantime, it has been pointed out that the former Lee Myung-bak administration’s diplomatic activities for natural resources procurement were influence peddling and corruption rather than the lack of determination on profitability and project sustainability. “Merrill Lynch ranked low among the 10 candidates at the primary quantitative index evaluation for advisor selection, but obtained the highest score in non-quantitative assessment, where subjective opinions of the examiners are allowed, to clear the first stage with the highest ranking,” Democratic United Party lawmaker Bu Jwa-hyun explained. He also pointed out, “Merrill Lynch’s Seoul branch head Kim Young-chan is the son of then-Chungwadae Secretary Kim Baek-jun, who was a close aide to former President Lee Myung-bak.”
“The acquisition of Harvest is clearly a corruption case committed by the previous government,” National Assembly of Trade, Industry and Energy Committee chair Kim Dong-chul criticized on Oct. 23. “With former president Kang having refused to be subject to the Board of Audit and Inspection investigation, we need to have the prosecution look into this case so that he is brought to the court,” he asked the committee members.