Prosecutors investigate bank chief over irregularities

(ATTN: RECASTS throughout with more details, background; TRIMS lead) SEOUL, Sept. 26 (Yonhap) -- Prosecutors said on Monday they were investigating the head of a troubled savings bank over alleged irregularities by the bank's top executives and large shareholders. Prosecutors earlier used a court-issued warrant to arrest Lee Yong-jun, president of Jeil Savings Bank, along with another top executive of the bank, on suspicions that they engaged in illegal loans by the bank. Jeil is one of the seven savings banks that have come under scrutiny since the government suspended their operations due to capital shortages earlier this month. Lee was the first bank executive to be arrested in the widening probe into the seven banks. A joint team of prosecutors, police investigators and officials from related financial authorities launched the probe on Friday, raiding the offices and homes of the banks' top executives and large shareholders in search of evidence supporting allegations of illegal loan issuances and unprofitable investments. The government imposed an exit ban on about 30 executives and shareholders of the banks suspected of engaging in the irregularities. Prosecutors have since questioned working-level officials of the banks based on materials confiscated during the raids. They were originally expected to summon top executives and large shareholders of the banks from the middle of this week. But the probe is anticipated to pick up speed with Monday's arrest of the Jeil Savings Bank chief as the move indicates that prosecutors found a considerable part of the corruption allegations are true. A team insider said the current investigation is focused on determining whether the troubled banks illegally lent to unqualified borrowers, including the banks' major shareholders, and issued loans to unprofitable projects. Prosecutors, however, refused to unveil the exact charges against the two arrested Jeil executives. The Financial Supervisory Service, the nation's financial watchdog, earlier said Jeil was discovered to have offered 160 billion won (US$134 million) in illegal loans partly through its special purpose companies to a project to build an express bus terminal in Goyang, just northwest of Seoul. "The investigation is to find out whether the management or major shareholders are responsible (for any wrongdoing) and is focused on locating any illegal loan issuance," a member of the joint team said, requesting not to be named. The latest suspension brought to 16 the total number of savings banks closed this year. Several heads and large shareholders of some of the previously suspended banks, including Busan Savings Bank, were later convicted of embezzlement and breach of duty by causing massive losses for the lenders.