The Hanbo scandal (also known as Hanbogate[1][2]) refers to the late-1990s corruption involving senior South Korean government officials and top executives of the Hanbo Steel (한보그룹) conglomerate, then South Korea’s second biggest steelmaker and 14th biggest conglomerate based on the book value of their assets.[1][3][4] The resulting scandal and trial of the first half of 1997 has been described as one of the largest ever scandals in South Korea.[5]

History

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Hanbo Steel received illegal preferential treatment from the government of Korean president Kim Young-sam, primarily through loans issued by banks under pressure from bribed high ranking politicians and bankers.[1][3][4] Losses from corruption and bribes are estimated at US$6 billion.[5]

Following a trial, by early June 1997 the company's founder, Chung Tae Soo [ko], was sentenced to be jailed 15 years. His son, Chung Bo Keun, was jailed for three years.[3] Eight other prominent figures, including former Home Minister Kim Woo Suk, several presidential aides and parliament members, and two former presidents of Korea First Bank were also handed sentences.[3] The son of the president, Kim Hyun-chul [ko], was arrested in a related investigation[3][6] and sentenced to three years in October 1997.[1][7] Hong In Gil of then ruling New Korea Party received the worst punishment, a seven-year prison sentence. Kwon Roh Kap, a member of the main opposition National Congress for New Politics, was sentenced to five years in prison.[3]

Impact

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The scandal is seen as having contributed to the Korean economic troubles of that time (see also Asian financial crisis of 1997), exposing South Korean's economy weaknesses and corruption problems to the international financial community. Hanbo was also one of the first in a series of at least ten large South Korean conglomerate bankruptcies that occurred shortly afterward (involving major companies like Kia Motors and Daewoo; the latter also part of a major corruption scandal).[1][5] The domino effect of collapsing large South Korean companies drove up interest rates and drove away international investors.[8]

In domestic Korean politics, the son of Kim Young-sam's involvement in the scandal undermined his father's reforms and anti-corruption campaign.[1][2][9][10]

In February 1997, Moody's Investors Service downgraded the long-term ratings of three Korean banks having the most exposure to Hanbo Steel: Korea Exchange Bank, Korea First Bank, and Cho Hung Bank. The ratings agency stated that its move reflected the bank's asset quality continuing to deteriorate.[11]

References

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  1. ^ a b c d e f Jon S. T. Quah (21 July 2011). Curbing Corruption in Asian Countries: An Impossible Dream?. Emerald Group Publishing. pp. 307–308. ISBN 978-0-85724-820-6.
  2. ^ a b Schuman, Michael. "Hanbo Scandal Highlights Failings of Kim's Crusade". WSJ. Retrieved 2018-08-28.
  3. ^ a b c d e f "Hanbo Steel Founder Given 15 Years in Korean Scandal". The New York Times. 2 June 1997. Retrieved 2018-08-28.
  4. ^ a b Noland, Marcus (2000-06-01). Avoiding the Apocalypse: The Future of the Two Koreas. Columbia University Press. p. 206. ISBN 9780881323030.
  5. ^ a b c John Malcolm Dowling (2008). Future Perspectives on the Economic Development of Asia. World Scientific. p. 305. ISBN 978-981-270-609-6.
  6. ^ Blechinger, Verena (2000). "Report on Recent Bribery Scandals, 1996-2000" (PDF). Submitted for a TI Workshop on Corruption and Political Party Funding in la Pietra, Italy.
  7. ^ "S. Korea president's son sentenced for bribes – Oct. 13, 1997". CNN. Retrieved 2018-08-28.
  8. ^ Sebastian Edwards (15 February 2009). Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences. University of Chicago Press. p. 503. ISBN 978-0-226-18499-9.
  9. ^ "Next, please". The Economist. 1997-03-06. Retrieved 2018-08-28.
  10. ^ Cho, Hee-Yeon; Surendra, Lawrence; Cho, Hyo-Je (2012-11-12). Contemporary South Korean Society: A Critical Perspective. Routledge. p. 152. ISBN 9781136191282.
  11. ^ "Hanbo Scam A Case For Financial Reform". Business Standard.