By Kim Sung-jin
Staff Reporter

In yet another round in the sibling feud over gaining control of Doosan Group, ex-chairman Park Yong-oh claimed his family misappropriated 13.8 billion won ($13 million) in company funds.

An internal company document, which was leaked to a vernacular newspaper by the dethroned chairman’s camp, showed that 28 members of the Park family that control the group borrowed 29.3 billion won from financial institutions to take part in two rounds of rights offerings by Doosan Industrial Development, the group’s construction arm, between November and December 1999.

The 28 included both the Park Yong-oh, who was deposed from the 10th biggest family-controlled conglomerate in a bitter fight with his brothers, and his brother Yong-sung, the incumbent head of the group.

In the process, they used 13.8 billion won in the subsidiary’s funds to pay 13.8 billion won in interest incurred from the loan in the following five years.

The Park family belatedly repaid 11.5 billion won to Doosan Industrial Development on Aug. 5, apparently fearing that their estranged brother would make the group’s dirty laundry public.

Doosan Group confirmed Park Yong-oh’s claim that Doosan Industrial Development borrowed funds to pay back interest for the majority shareholders but denied that the family members’ appropriated company funds constitutes misappropriation.

``The owner family raised the loans to squeeze Doosan Industrial Development’s debt-to-equity ratio down to 200 percent in order to prevent the constructor from being forced out from the bourse due to its high debt ratio,’’ a Doosan Group spokesman said.

He stressed that the Park family wouldn’t have paid back the interest yielded by the loans if they were meant to embezzle the company fund.

``Doosan Industrial Development paid the interest for loans borrowed by its executives and employees who voluntarily used the loans to purchase shares of the construction firm during the second round of the rights offering,’’ the spokesman said.

``It was a gesture of gratitude for the employees who purchased the shares at prices lower than the face value of the construction subsidiary’s stocks. We paid interest for majority shareholders in the same sense,’’ he added.

Nevertheless, the Park family is suspected of having appropriated corporate funds to maintain managerial control of Doosan Industrial Development, which is one of the core Doosan companies that are tied to Doosan Corp., the de facto holding company of the conglomerate, by a complicated web of cross shareholding.

Park Yong-oh and his children asserted that they were not informed about the capital increase through two rounds of rights offerings as Doosan Group borrowed the money and paid the interest on behalf of individual family members.

However, the Center for Good Corporate Governance (CGCG) said appropriating company funds to pay interest on loans to majority shareholders can only be interpreted as embezzlement.

``If Park family members served as executive directors of Doosan Industrial Development to influence the board’s decision-making process, then the management and that family members will face charges of malfeasance,’’ CGCG executive director Kim Sun-woong said.

Kim, also a lawyer, said if Park Yong-oh were aware of the malpractice, the ex-chairman and his children will face heavier penalties by the court as judges will alleviate the penalty for those who repaid the company fund.

Under the Korean Additional Punishment Law on Specific Economic Crimes, entrepreneurs who embezzle company funds of more than 5 billion won can face life imprisonment.

Following the latest revelation by Park Yong-oh, it seems inevitable for these family members to avoid the prosecution’s investigation into Doosan Industrial Development as they are suspected of dodging taxes and as the constructor has violated the regulatory filing rules, in addition to the ongoing probe on slush funds and accounting fraud.

sjkim@koreatimes.co.kr