The Hanbo Scandal Erupts
Time Warner Nextcom. Hanbo Steel's bankruptcy. That day was January 24th. For the Blue House, it was nothing short of a bolt from the blue. Barely a month into the new year, as the administration sought to build momentum for re-election on the back of economic and cultural achievements, the collapse of Hanbo Steel—ranked fourteenth among Korea's conglomerates—felt like ash scattered over a finished meal.
The Blue House responded in its usual manner. "The Korean economy has no problems. Hanbo Steel's bankruptcy is merely a case of moral hazard among its executives and will have minimal impact on the broader economy." They framed it as a corporate management issue rather than a national one. The media followed the Blue House's line, churning out articles in lockstep. Most outlets favored extending the conservative regime's power, making the alignment seamless.
Yet not everything went according to plan.
Jeon Myeong-heon, still at the Blue House, had begun to speak differently. Hanbo Steel was the core subsidiary of the Hanbo Group, a conglomerate that had proudly ranked fourteenth in Korea's business hierarchy, centered around its construction arm, Hanbo Construction. Until the previous year, the group had loudly proclaimed plans to build a massive steel mill and boldly pursued development of Russian gas fields. It turned out these were all reckless overextensions.
Building a second Pohang Steelworks in a country that had only small-scale mills besides Pohang itself had seemed reasonable in theory. But the execution had been far too hasty. To fund the steel mill, the group had borrowed enormous sums from banks—amounts in the trillions of won, not mere billions. By any standard, Hanbo's assets could never have secured such loans, yet approvals had miraculously gone through.
Jeon Myeong-heon seized on this. Soon, the political world—especially the opposition—exploded with accusations that the Blue House had been involved in illegal lending. The Blue House naturally defended itself, calling the claims baseless leaps of logic. Meanwhile, some ruling party members accused Jeon of deliberately clashing with the Blue House to position himself for a presidential run, after years of enjoying the comforts of power.
The media focused only on the politicians' war of words. The golden window to contain the aftershocks of Hanbo Steel's bankruptcy had been squandered on pointless political bickering.
"Nothing ever deviates from expectations, does it?"
Yoo Jae-won clicked his tongue as he read yesterday's news compiled by the secretariat on his laptop.
"What do you mean, sir?"
Remington, seated beside him, responded immediately.
"Ah, it's about Korea. A company that expanded too aggressively went bankrupt, and there's evidence the Blue House facilitated massive illegal loans. Without concrete proof yet, the controversy is only growing."
"The Blue House?"
"That's the White House, in American terms."
"Ah, I see what you mean."
Remington nodded at Yoo Jae-won's explanation.
"Right now, the priority should be dealing with the banks that made bad loans and rescuing trading partners holding dishonored bills, but all they're doing is arguing."
Remington simply nodded. He wanted to offer a comment but had none to give—this was Korean internal affairs. Yoo Jae-won felt the same. They were aboard a chartered flight to New York, after all. There was little he could do about the matter here. He merely instructed Kim Dae-seok to contact the Korean intelligence team upon landing and send a special gift to Jeon Myeong-heon.
After giving the order, Yoo Jae-won pressed the page-down key. The smooth scrolling animation and rapid page loading were far faster than on his old Shell Book. That was only natural—the laptop on his lap was not the clamshell Shell Book but the iWorks notebook, a high-performance machine built for professionals.
Of course, the Shell Book had also evolved with its second generation, boasting improved LCD quality, response speed, faster CPUs, and greater memory capacity. It performed significantly better overall, yet it still could not match the newly launched iWorks notebook lineup designed specifically for experts.
Inheriting the iWorks design, the notebook featured a premium aluminum alloy case, a large 14-inch LCD, a powerful CPU, and the latest 3D acceleration card—performance rivaling a desktop. Its only drawback was battery life, but the plane had power outlets, so it posed no issue.
The iWorks notebook was meant not only for high-performance computing in unplugged environments but also for professionals who frequently traveled and needed to work from shifting desks.
The new page summarized reactions to the Nextcomcast–Time Warner merger—from negative articles to Ted Turner's interview and ID Group's measured response.
Financial information was also included. The merger news was largely positive for the stock market. Time Warner in particular had been viewed as having little connection to IT, which was accurate. But merging with Nextcomcast would instantly transform it into North America's largest internet company, so its stock price was bound to surge.
Yoo Jae-won briefly wondered what Nextcomcast's share price would have been had it gone public. The answer came quickly: the reaction would not have been favorable. Traditional media companies had repeatedly failed to integrate with the internet. Newspapers, for instance, still could not figure out how to monetize their daily articles online. Print editions were paid, yet their websites had to be free or readers would not visit. The only place where online articles generated revenue was on Nextcom's news pages—ironically, the more successful Nextcom News became, the fewer visitors their own sites received.
Many newspapers were agonizing over whether to cut off article supply to Nextcom and grow their own sites, or continue supplying Nextcom and collect payments. Some bold outlets had launched paid subscription models and reduced their Nextcom contributions, but subscriber numbers had fallen far short of expectations. Cutting supply to Nextcom had only caused click counts to plummet, reducing traffic to their own sites as well.
Given Nextcomcast's dominant position on the internet, quite a few people were reluctant about merging with the old-fashioned Time Warner. Small shareholders who had stubbornly held onto their Comcast stakes were especially vocal in opposition. Nextcomcast had been formed by acquiring 65% of the shares held by Comcast's founding family and major shareholders. The remaining 35% belonged to investment firms and small shareholders who refused to sell. Even after Nextcomcast began steadily buying back its own shares instead of paying dividends, that figure had dropped below 20%, yet many still held on—apparently betting on a massive value increase if the company relisted like Android OS later.
They opposed the merger because they believed it would reduce the explosive potential compared to listing Nextcomcast alone. However, they had failed to unite their voting rights and speak with one voice. Yoo Jae-won held an overwhelming controlling stake, so it was not a major problem. Moreover, he was confident the merger with Time Warner would deliver results beyond anyone's imagination—that was why he had pushed it forward.
The key issue was securing management control of the new merged company. If they merged only to be dominated by the Time Warner side, the outcome could be as disastrous as the AOL Time Warner debacle. That was why Yoo Jae-won, Remington, and their entourage were heading to New York—to negotiate the merger structure at Time Warner headquarters. The stakes were indescribable. Remington and the working-level staff could not hide the tension on their faces. This was a deal worth well over $100 billion. Even Remington, who had handled large sums since joining ID Group, had never seen anything on this scale.
Yoo Jae-won, by contrast, remained completely relaxed. As the owner, he could walk away anytime if things went south, so he felt no pressure about the upcoming negotiations in New York.
A few days later, the Hanbo Steel bankruptcy accelerated rapidly.
When the Munhwa Daily—a newspaper with little presence among Korea's dailies—mentioned Kim Young-chul, the Hanbo Steel bankruptcy escalated into a full-blown political scandal. At the same time, politicians realized that President Kim and Jeon Myeong-heon had crossed an irreversible line. The Munhwa Daily that had targeted Kim Young-chul was essentially the in-house newsletter of the Mirae Group. Its major shareholders were Mirae Group affiliates, and their combined stake exceeded 50%. For such an outlet to publish an article attacking Kim Young-chul meant the coalition between the ruling Minja Party and Jeon Myeong-heon's Tongil National Party was effectively over.
Moreover, the article had not attacked Kim Young-chul without evidence. It contained specific details about how he had arranged illegal loans and received kickbacks.
Jeon Myeong-heon's statement was, of course, included. He did not stop at words—he also submitted his resignation as prime minister and did not nominate a successor. Through this, he made the entire nation understand that the coalition between the Minja Party and the Tongil National Party had completely ended.
When this happened, Yoo Jae-won was in the middle of negotiations with Time Warner's executives and only received the report later. Upon reading it, he could clearly sense Jeon Myeong-heon's burning ambition for the presidency. With this move, he had severed any lingering attachment to the coalition. Some Tongil National Party lawmakers might still have reservations, but with Jeon Myeong-heon taking this stance, none could defy him and speak otherwise.
The Democratic Party, reading the tide, joined in as well. The Hanbo Steel bankruptcy had spread across Korea like ripples from a stone dropped in still water. Yet the ripples remained confined to the political sphere. Disappointment with President Kim had grown sharply, but that was all. On the KOSDAQ, blind investment in IT stocks continued unabated. Even the Ilseong Group was no exception.
There had been a brief reconsideration of the block deal for Ilseong Group shares with Yoo Jae-won, who held the secret of succession. But it was only a minor controversy. The contract had already been signed, and the agreed date for exchanging shares, cash, and bonds remained unchanged. For Chairman Choi Hyun-hee, the uncertain danger signal was far less important than the matter of succession.
Indeed, on the contract date, $4.8 billion was wired in a single transaction to ID Investment's account under the name of Ilseong Motors. Even Yoo Jae-won, who had handled large sums online many times, had never seen $4.8 billion deposited all at once. That was not all. The bonds issued in the name of Ilseong Electronics had also been delivered without issue—eighteen corporate bonds with a face value of $100 million each, one-year maturity, and a 13% interest rate.
Accordingly, Yoo Jae-won transferred all shares in Ilseong Group affiliates held by ID Investment to Ilseong Motors, completing the transaction, and the disclosure was duly filed. An investment of $2 billion had returned $6.6 billion including the bonds—a successful deal. Yet neither ID Investment nor Yoo Jae-won made much fuss. Yoo Jae-won had far more important matters occupying his attention and no bandwidth to spare.
That matter was the ongoing negotiations with Time Warner's top executives—Chairman Gerald Levin, Vice Chairman Ted Turner, and others—over the merger structure, which were now sparking with tension. One negotiation tactic involves starting with an inflated demand and gradually conceding as if compromising. It seemed Chairman Gerald Levin of Time Warner had chosen this approach. But this man had no sense of proportion.