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Bankruptcy scandal adds to S. Korean government woes
January 27, 1997
Web posted at: 11:30 a.m. EST (1630 GMT)SEOUL, South Korea (CNN) -- South Korean President Kim Young-sam announced a probe into the bankruptcy of the country's second largest steelmaker under mounting pressure to clarify his government's role in case.
"There should be a thorough and stern investigation, leaving no spot of suspicion," Kim said during a meeting with Prime Minister Lee Soo-sung.
Hanbo Steel defaulted last week on a $6 billion debt, which included bank loans that critics of Kim's government say were made under influence of the government. The company's debt was about 20 times its net worth.
The government has any denied involvement, but Kim's ruling New Korea Party agreed to a parliamentary probe into the bankruptcy, called by some opposition leaders the biggest corruption scandal in South Korean history.
"Our party has evidence that the privileged loans were given on order from the presidential office," said Kim Dae-jung, head of the National Congress for New Politics, South Korea's largest opposition party.
Government officials accused the opposition of spreading unfounded rumors to damage the New Korea Party's chances in coming presidential elections.
"I can swear with confidence that neither President Kim, his family members nor those in his inner circle have anything to do with the Hanbo case," newspapers quoted Kim's chief political secretary as saying.
The scandal worsened what was already a difficult period for the current administration, still trying to defuse the political crisis over a controversial new labor law.
Militant labor leaders led more than three weeks of strikes demanding that the government repeal the law before agreeing last week to hold only one-day-per-week strikes. The unions have set a February 18 deadline for the government to repeal the law, which makes it easier for companies to fire employees.
Hanbo Steel, an affiliate of the Hanbo Group, ran into financial trouble while building a new plant. A drop in prices of its key steel products also led to its downfall.
Two other affiliates of the Hanbo Group are expected to file for court receivership, possibly as soon as Tuesday.
Seoul Bureau Chief Sohn Jie-Ae and Reuters contributed to this report.
Related stories:
- S. Korean opposition rejects offer to debate labor law - January 22, 1997
- S. Korean president to send labor law back to parliament - January 21, 1997
- S. Korean president agrees to meet opposition leaders - January 20, 1997
- Students, police clash violently over S. Korea labor law - January 19, 1997
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