The Primus Scandal (3)
Contrary to its original explanation that the Primus Fund invested only in receivables from public institutions, it was confirmed that the fund had actually been buying up large amounts of CBs and BWs from failing companies.
Signs also emerged that it had been running a kind of rolling fraud, using new money to pay off old obligations.
Out of more than one trillion won in assets under management, no one could even properly verify how much was left. It was so bad that finding anything that matched between the paperwork and the actual assets was difficult.
Investors who had trusted the claim that their money was being placed only in public-institution receivables were hit by disaster overnight.
Corporate clients flooded the firm with complaints, and customers descended on branch offices demanding redemptions.
Not only the Primus Fund but other products as well were hit with a wave of redemption requests.
The customer response team could do little but answer incoming calls, leaving no room for any other work, and individual victims swarmed DA Securities all at once, demanding compensation.
Strictly speaking, DA Securities was a victim too.
But even if they had sold it without knowing, it was hard to escape liability for compensation. Those fears were reflected in the stock price as DA Securities plunged to the daily limit down.
Even in the media and within the group, responsibility began to be pinned on Executive Director Yang Jeong-uk. It was only natural, since he had spent the whole time promoting Primus Fund as one of his own achievements.
DA Securities shareholders rose up in unison and demanded Yang Jeong-uk’s dismissal.
* * *
For several days, news about the Primus affair dominated the front page of the papers, and Yeouido was in an uproar over it for quite some time.
When the investigation first began, the scale of the bad assets was expected to be around twenty percent, and at most not to exceed thirty.
But once the investigation actually got under way, the scale of the losses swelled like a snowball. One fund was left holding nothing but bonds from an issuer that had gone bankrupt, pieces of paper worth no more than scrap, and the others were in much the same state.
The estimated bad-asset ratio: ninety percent.
People were saying they should be grateful if they could recover even the remaining ten percent. At least the arrest of CEO Park Tae-il and the other people involved meant asset recovery was moving quickly.
Park Tae-il, once considered a brilliant investor and one of the figures who had helped popularize private equity in Korea, now found himself arrested and under investigation.
“How much of the company’s assets are left?”
“Did you conspire with DA Securities?”
“Why did you try to flee overseas?”
“Do you have a message for the victims?”
With handcuffs on his wrists, Park Tae-il stood in the photo line as the reporters’ questions poured down on him, and he kept his head bowed low as he answered, “I’m sorry for causing public concern. I’ll cooperate fully with the investigation.”
Who knew just how fully he intended to cooperate? He had assembled an ultra-elite defense team made up of former prosecutors and judges, and the victims watching that spectacle erupted in anger.
That was one of the ugly truths of financial fraud.
The perpetrator used the money stolen from victims to hire multiple lawyers and defend himself, while the victims who had lost everything had no real way to fight back.
The scandal even sparked talk that the DA Financial Group succession line would be reshuffled, and the internet went into a frenzy.
During the investigation, it was also revealed that Park Tae-il had lobbied the Depository Trust and Clearing Corporation, the custodian institutions, and influential politicians and bureaucrats, and the fallout spread into the political world.
Among them were not only officials from the Financial Services Commission and the Financial Supervisory Service, but even people inside the Blue House.
When recordings surfaced of Park Tae-il bragging about his ties to Kim Bong-jun, the senior secretary for political affairs, and Yoon Jun-gi, the senior secretary for civil affairs, and when Kim Myeong-hyeon, an administrative officer from the FSS seconded to the Blue House Office of Economic Affairs, was identified as a key figure in the lobbying operation, the Blue House could not hide its embarrassment.
The prosecution summoned the people involved one after another, and the opposition Our People’s Party branded it the “Park Tae-il Gate,” pressuring President Oh Young-hwan to come forward and explain himself personally.
Criticism also poured down on the Financial Services Commission and the Financial Supervisory Service.
Beyond simply failing to monitor the market properly, they were now being accused of having known about the bad assets in advance and looking the other way.
FSS Governor Jang Jin-haeng said he had not known about the Primus losses and had absolutely never condoned them even if he had known, but no one believed a word of it.
Already in a situation where approval ratings were falling, the sudden eruption of the Primus affair was a major political liability for the administration.
If the new hire had not exposed it, the scandal might never have surfaced before the end of the term. But because it broke now, it grew all the way into a case of corruption involving the president’s close allies.
President Oh Young-hwan stared at the report in front of him and muttered, “Han Miru....”
Did that new hire even realize how big a mess he had just made?
* * *
Yang Hyeon-seong.
The chairman of the DA Financial Group was in his office, barking at his son.
“I sent you out there to build a record, and you went and caused a disaster of this scale! Do you even know how much we’re losing right now?”
Yang Jeong-uk answered as if he had been wronged. “My sister was directing this from behind the scenes! She stirred everything up because she wanted the succession seat for herself. You know that, Father.”
Chairman Yang Hyeon-seong let out a long sigh.
“Fine. Let’s say Ja-eun gave the orders. But you couldn’t handle even that properly, and now you’ve made a complete mess of things? Do you have any idea how the shareholders are demanding that we bring in a professional manager?”
Korean chaebol leaders could steer an entire group with only a tiny stake because the other shareholders agreed to let them.
The shareholders recognized Chairman Yang Hyeon-seong, but they were beginning to doubt the management ability of his heir, Yang Jeong-uk.
Until now they had at least been willing to wait and see, but this incident had finally blown open the opposing voices.
If he ignored that sentiment and acted on his own, the friendly shareholders would all turn their backs on him.
“And what about the Primus Fund losses? Don’t tell me you want to say that was Ja-eun’s doing too?”
“Th-that’s...”
“Why didn’t you catch the bad assets!?”
It was fortunate the scandal had broken now. If they had continued selling the fund without knowing, DA Securities might have gone under.
Yang Jeong-uk tried to defend himself. “There was nothing wrong with the documents. Even the FSS and the custodian institutions didn’t know.”
Chairman Yang Hyeon-seong snapped again. “Then how did that new hire know!”
“....”
That was the question Yang Jeong-uk himself could not get past.
Only after the scandal broke did he learn how the whole thing had unfolded. That employee had gone to DA Card, made contact with Yang Ja-eun, and she had begun investigating Primus after that.
In other words, the one who made the affair explode was Yang Ja-eun, but the first person to uncover it was Han Miru.
Chairman Yang Hyeon-seong looked at his son and sighed. “If you’re going to run a group, everyone around you will be an enemy at some point. Are you going to whine every time someone lands a punch on you?”
Watching this, his disappointment in his son was profound. His daughter, on the other hand, had moved immediately, refusing to let the opportunity slip away.
At this point, he had no choice but to reconsider the succession issue.
Yang Jeong-uk said in a hurry, “You’re not thinking of handing it to my sister, are you?”
“I have only two children. If one of them makes a mess, what am I supposed to do? There’s still time, so do well until then.”
Chairman Yang Hyeon-seong was suffering from a brain tumor, a chronic illness.
How much longer could his father really remain chairman?
Could he restore his image and win back his father’s and the shareholders’ trust before then, then seize the succession seat again?
No matter how he thought about it, it seemed doubtful.
“Father!”
Chairman Yang Hyeon-seong waved a hand as if he didn’t want to hear another word.
“Enough. Get out.”
In the end, Yang Jeong-uk left the office with no strength left in him.
He thought of the new hire he had met in the cafeteria.
That bold little bastard had made an impression, staring him straight in the eye despite being a newcomer and tossing out such brazen questions.
He already knew everything back then. He’d been preparing to blow it up from the start.
When there’s a problem, the proper thing is to report it to him first. If that had happened, he might have found a way out.
But the man had gone to Yang Ja-eun instead. And then, after digging a trap deep enough that Yang Jeong-uk couldn’t escape, he blew the whole thing open.
Why?
No matter how much he thought about it, he had never had any direct entanglement with that new hire. No, before all that, he’d barely even seen the guy’s face.
What possible grudge could he have against me!
He had never imagined that a new hire would stab him in the back and strip him of everything.
There was no humiliation greater than this. Whether he knew it or not, he had probably become the laughingstock of the business world.
He clenched his fist so hard his teeth ground together.
* * *
Jin Se-yeon could not hide her surprise as she read the articles coming out.
What? So what Miru said that day was true?
To be honest, people who hadn’t invested had little interest in whether the fund survived or collapsed. But the people close to her were different.
That was because not only the announcer sister who had introduced her to Lim Jun-il, but everyone around her as well, had trusted him and put their money in.
“What? This was a scam?”
“What do we do? I put two hundred million won in there.”
“What happens to my money?”
“Didn’t they say the Primus Fund was safe?”
“You’re telling me they really invested in failing companies and lost everything?”
Jin Se-yeon sat there in a daze for a while.
She knew at least that Lim Jun-il had feelings for her. But to think he had been involved in a fund fraud scheme.
The man who had been calling and texting her every day stopped contacting her completely once the articles came out. Even when she called, he didn’t answer.
What would have happened if she hadn’t found out and kept seeing Lim Jun-il? The moment that thought crossed her mind, a chill ran down her spine.
A DA Securities new analyst exposed it?
His name hadn’t been mentioned directly in the article, but she could tell that the whistleblower was Han Miru.
Jin Se-yeon remembered how he had acted that day and thought,
Wait. Was this because of me? Did he expose it for my sake?
...It was a misunderstanding.