Korean media reported that investigative agencies have launched a full-scale investigation into a criminal allegation that some executives of Korea Development Bank and Korea Trade Insurance Corporation were accused of deliberately planning the bankruptcy of SLS Shipbuilding and causing losses of up to $1.5 billion.
South Korean legal sources have recently revealed that the Seoul Metropolitan Police Agency in South Korea has transferred the case of embezzlement charges filed by Lee Kook-chul, former chairman of SLS Group, against Min Ryu-sung, former president of Korea Development Bank, and Yoo Chang-woo, former president of Korea Trade Insurance Corporation, under the Act on Aggravated Punishment for Specified Economic Crimes, to the police department of the area of jurisdiction.
Initially, Lee Kook-chul, former chairman of SLS Group, filed a lawsuit against 13 people, including Min Ryu-sung, but later announced that he had withdrawn the lawsuit. It is alleged that Lee has re-filed the case and the number of persons indicted has increased from the initial 13 to 49.
The latest news is that the police station where the case is being handled has summoned the prosecutor for investigation. After obtaining a basic overview, the investigation team will again summon the prosecutors and their attorneys to confirm the content of their allegations.
According to the litigation documents of Lee Kook-chul, in 2009, SLS Shipbuilding received orders for 77 ships in total from domestic and foreign shipowners. However, Min Ryu-sung, Min Ryu-sung and other defendants, on the grounds of corporate restructuring (i.e., reorganization), only allowed the construction of 30 ships, while the remaining 47 ship were declared to be withdrawn from the shipbuilding contracts, including the addition of interest on the 47 withdrawn ships, resulting in a loss of as much as $1.2 billion to SLS Shipbuilding.
Lee Kook-chul claimed that the foreign shipping companies made more than $750 million in profits by illegally and forcibly making SLS Shipbuilding, which was in good shape, give up its right to build 47 ships.
During the course of deliberately causing the bankruptcy of SLS Shipbuilding, Lee Kook-chul claimed that the former President of the Korea Development Bank and Korea Trade Insurance Corporation had deprived it of its majority shareholder status and representation in 2010 through a board of directors composed of unauthorized directors. Lee Kook-chul subsequently restored his corporate status and representation in 2022 through related litigation over a period of 10 years.
Meanwhile, Lee Kook-chul claimed that political interference was behind the bankruptcy of SLS Shipbuilding. The incident began with a whistleblower letter “targeting” the company’s management rights, which was then investigated by Korean prosecutors on the order of the Government.
It is understood that, as a former backbone of South Korea’s medium-sized shipbuilding enterprises, SLS Shipbuilding had ranked 16th globally with 2.09 million compensated gross tonnage (CGT) (as of the end of 2008) of hand-held orders in the shipbuilding boom period before the 2008 global financial crisis.
The good times didn’t last long, as SLS Shipbuilding declared bankruptcy in 2015 after making a decision to reorganize in 2009. Since 2009, SLS Shipbuilding has been in a serious financial crisis. In fact, SLS Shipbuilding’s peak order intake performance was based on the bubble formed by the hot ship market at that time.