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Prosecutors uncover more slush funds in Hanbo scandal

March 29, 1997

SEOUL, South Korea (AP) _ Hanbo Steel Industry Co., bankrupt and caught up in a bribes-for-loans scandal, has diverted $34.5 million from bank loans into slush funds, prosecutors said today.

Investigators were looking into whether Hanbo used the money to bribe politicians and government officials to get more loans needed to build its multi-billion dollar steel plant.

The company, South Korea’s No. 2 steel producer, collapsed in January $6 billion in debt, most of that in bank loans. Ten politicians, bank officials and Hanbo executives have been charged with offering or accepting bribes that facilitated the loans.

Still, critics denounced the probe as a whitewash, and state prosecutors reopened their investigation earlier this month. The political opposition claims that more politicians and Cabinet ministers took bribes from Hanbo.

Four of the people indicted in the scandal were allies of President Kim Young-sam. While the president has not been implicated in the scandal, it has dealt a serious blow to his government’s credibility.

Opposition parties accuse Kim Hyun-chul, the president’s 37-year-old son, of being a main broker of loans for the bankrupt steel company. They have forced the National Assembly to open a separate investigation.

Senior prosecutor Kim Sang-hee said today that Hanbo’s chairman, Chung Tae-soo, put at least $34.5 million into slush funds from bank loans he had drawn to build his steel plant.

``We will continue our investigation into whether chairman Chung distributed the money among politicians,″ Kim said.

Prosecutors also were working with state tax collectors trying to find more slush funds or hidden property belonging to the Chung family.

When prosecutors indicted Chung on corruption charges in February, they said he siphoned off $251 million from bank loans to buy other companies and pay bribes. They could account for only $4 million in alleged bribe money.

On Thursday, prosecutors froze $390 million in property and stocks they say Chung’s family was hiding. They were seeking court approval to confiscate the assets.

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