The Genius Grandson of the Loan King - Chapter 95 (95/840)
< The Start of the War of Shen. >
#95
The Start of the War of Shen.
Rumors had already circulated that other forces had intervened in the dissolution of the Jungwoo Group.
This was inevitable because the subsidiaries of the Jungwoo Group, which had been torn apart and sold to other large corporations and foreign capital, had continued to grow without any issues.
"What exactly is the reason for Chairman Park's arrest by the prosecution? Have the Chief Prosecutor come in immediately."
"Yes, Mr. President."
From the morning, the main daily newspapers were filled with various reports of corruption and malfeasance in the Jungwoo Group, and the President, Kim Hak-gwan, was busy trying to understand the situation, especially after hearing that the chairman of a large corporation had not just been summoned to the prosecution but had been urgently arrested.
A short while later, Prosecutor General Yun Chang-ho entered the Blue House in response to President Kim Hak-gwan's call.
"Welcome, Prosecutor General Yun."
"Did you call for me, Mr. President?"
"Please, have a seat."
As soon as Prosecutor General Yun sat down, President Kim Hak-gwan sighed deeply.
"What exactly is going on with the Jungwoo Group?"
In response to the straightforward question, Prosecutor General Yun did not hesitate and spoke about what he had been thinking on the way.
"The accounting fraud is really serious, Mr. President. If left unchecked, it could become a time bomb that could destroy South Korea in one fell swoop."
"No, how can you let such a thing happen without reporting it to me, the President, first?"
"I apologize. We were preparing, but the media broke the story first, leaving us with no choice."
At this, President Kim Hak-gwan sighed again.
Prosecutor General Yun added, "Chairman Park Dae-ho could have fled the country at any time, so we had no choice but to arrest him urgently. The court issued a warrant immediately after reviewing the materials we prepared."
President Kim Hak-gwan frowned and remained silent for a moment before asking a heavy question.
"Do you plan to detain Chairman Park?"
"Yes. If we release him without detention, there is a significant risk of evidence tampering and cover-ups."
"Starting from the gold collection campaign, there are many things Chairman Park needs to do. Can't it be avoided?"
Prosecutor General Yun replied with a worried look on his face.
"If you give an order, Mr. President, we will follow it. However, there will be significant political burdens."
"It's still the honeymoon period. The media won't publish negative articles about me right away. So... let's keep Chairman Park under non-detention for now. I'm not saying to drop the charges, but to investigate a bit more slowly under non-detention."
"Yes, Mr. President."
At that moment, the chief secretary rushed in, opening the door.
"Mr. President! You should see the news!"
"What? What's happened?"
President Kim Hak-gwan, who was about to reprimand the chief secretary for suddenly opening the door, closed his mouth when he saw the chief secretary's pale face.
The chief secretary turned on the TV without a word.
โ We are preparing for a hostile takeover of the key subsidiaries of the Jungwoo Group. As a major shareholder, I can no longer stand by and watch Chairman Park Dae-ho's misconduct, so I have made this decision.
โ What are your plans going forward?
โ We will initiate a public tender offer for the shares of Jungwoo Corporation and other core subsidiaries. I plan to act in concert with many investment firms that hold shares of Jungwoo.
On the screen, a woman with an exotic appearance was being questioned by numerous reporters.
The subtitle "Eva Zhu" appeared at the bottom of the screen.
"What is this?"
President Kim Hak-gwan, who had seen the press conference, opened his mouth wide.
Prosecutor General Yun was focused on the voices of the announcers coming from the TV.
The chief secretary, trembling, replied.
"The press conference is just the beginning. We've received calls from U.S. investment banks to the Ministry of Finance, asking for the government's stance on the Jungwoo Group."
"What?"
"If the government does not act according to the agreed plan...โ"
The chief secretary couldn't bring himself to finish the sentence, but President Kim Hak-gwan understood the rest without needing to hear it.
"Have the Minister of Finance come in immediately."
"Yes, Mr. President."
The chief secretary hurried out, and President Kim Hak-gwan turned to Prosecutor General Yun.
"For now, let's think slowly about how to handle Chairman Park. You handle it as you see fit."
Prosecutor General Yun nodded with a calm expression.
"Then I will take my leave, Mr. President."
"Keep me updated on the investigation."
"Understood."
Prosecutor General Yun stood up, bowed to the President, and turned to leave.
At that moment, President Kim Hak-gwan's voice stopped him.
"By the way, how serious is the accounting fraud?"
Prosecutor General Yun turned around. His stiffened mouth opened.
"The amount already uncovered is over 10 trillion won. This is just the tip of the iceberg."
"Indeed..."
President Kim Hak-gwan was momentarily speechless at the enormous amount.
"Additionally, there are signs that funds have been moved abroad. Embezzlement and breach of trust are just the basics."
"Understood. You may go."
"Yes, Mr. President."
As Prosecutor General Yun left, President Kim Hak-gwan, left alone, covered his head with both hands.
"What is Chairman Park thinking?"
As he shook his head in deep thought, Minister of Finance Lee Sung-gyu entered the room.
"Mr. President, did you call for me?"
"Minister Lee, welcome. Please, have a seat."
Lee Sung-gyu, who had worked as a bureaucrat during the Fifth Republic, still used the term "Mr. President" despite Kim Hak-gwan's request to avoid it.
"How is the situation?"
"The Ministry of Finance opposes injecting public funds into the Jungwoo Group, using this opportunity to warn the chaebols. Reviving the Jungwoo Group could collapse the Korean economy."
"Indeed..."
"Especially, the IMF will not stand idly by. The promised dollars have not yet fully entered the country."
"It's a top-three large corporation. We don't know what side effects its collapse could have."
President Kim Hak-gwan spoke heavily. Minister Lee Sung-gyu's expression was also grim.
"What does the prosecution say?"
"They plan to conduct a detention investigation."
"The IMF's second round of support has temporarily put out the urgent fire, but there are no new investments from foreign investors. If you, Mr. President, step in to save the Jungwoo Group, which has a CEO risk, no investors will invest in Korea."
President Kim Hak-gwan felt frustrated.
"Who is this Eva who held the press conference today?"
"She is an investor based in Hong Kong, who entered the country under the name Future Investment before the IMF agreement was signed. It is believed that funds from Hong Kong and the UK are behind her. Currently, she is focused on real estate investments, but she may eventually start hunting for companies."
"What about her capital?"
"She is among the top foreign capital that has entered the country."
Muttering "Future Investment" to himself, President Kim Hak-gwan groaned.
"What do you think will happen with the hostile M&A?"
"It will be difficult. Even if all the shares on the market are acquired, it will be hard to win given the cross-shareholdings among the Jungwoo Group subsidiaries. However, it's hard to predict what will happen over time."
The cross-shareholding structure of Korean large corporations was quite solid.
However, it was also a governance structure with many vulnerabilities from the perspective of foreign investors.
"Over 10 trillion won in accounting fraud has been uncovered at the Jungwoo Group. Is this normal?"
Lee Sung-gyu's face turned slightly pale.
"Accounting fraud in large corporations is not a new issue. We had the Hyundai Group case recently. But 10 trillion won... I've never seen such an amount before."
"What about breaking up the Jungwoo Group and having other large corporations acquire it?"
"It's too big. The acquisition cost is one thing, but the burden of debt and bad loans is too great for large corporations to step up easily. They might be interested in a few good subsidiaries, but they won't look at the bad ones."
As Minister Lee Sung-gyu shook his head, President Kim Hak-gwan covered his forehead with his hand and muttered.
"Are you saying there's no solution?"
"Mr. President, you know that we need an investor who can act as a white knight for our government... someone who is on good terms with the U.S. government, is foreign capital, but friendly to Korea."
"Are you talking about Han?"
"Yes, we can request help urgently, and once the Korean economy stabilizes, we can ask for a resale to domestic large corporations. Other private equity funds will sell off everything valuable as soon as they acquire a company. Their goal is the company's capital, not the company itself."
The conversation between President Kim Hak-gwan and Minister of Finance Lee Sung-gyu continued for a long time afterward.
A short while later, Minister Lee Sung-gyu, who had finished his meeting with the President, left the Blue House and made a phone call from his official car.
"Yes, senior. The government will not save the Jungwoo Group. You can proceed as planned."
โ Thank you. I'll set up a meeting soon.
"Thank you. I'll see you next time."
The face of the Minister of Finance, who hung up the phone, showed satisfaction.
He was the economic leader responsible for the Korean economy but also a core member of the Mofia.
The official car carrying Minister Lee Sung-gyu slowly entered the tunnel.
The future of the Jungwoo Group was also flowing into a long, dark tunnel.
* * *
In the end, a detention warrant was issued for Chairman Park Dae-ho, and he was imprisoned that evening.
For several days, the front pages of major daily newspapers were dominated by stories about the Jungwoo Group.
"Still no call from the Blue House?"
"Yeah, not yet."
"It will come soon. Eva is doing her job well."
Eva continued to give interviews to the media, expressing her opinions.
As the Jungwoo Group wobbled and the stock market, which had been in a dark period, saw a long-awaited warm breeze, domestic large corporations were also looking for potential acquisitions among the Jungwoo subsidiaries. Overseas giant private equity funds also showed interest in joining the acquisition battle, deepening the government's dilemma.
"The accounting fraud we know about is just the tip of the iceberg. Once the Financial Supervisory Service conducts a proper investigation, those who jumped into the acquisition battle will withdraw, shaking their heads. Except for a few good subsidiaries, of course."
The accounting fraud at the Jungwoo Group was called a textbook case. Various sophisticated methods, beyond imagination and comprehension even by experts, were employed.
It was likely a collaborative work of dozens of accounting experts and certified public accountants.
It would take a long time for the Financial Supervisory Service to uncover everything.
While all attention in South Korea was focused on the Jungwoo Group's insolvency, other domestic companies continued to go bankrupt.
The government needed to make a quick decision on how to handle the Jungwoo Group.
"Will you meet alone if the Blue House calls? What about you, Mu-hyuk?"
"This time, you need to act alone."
He patted Han Kyung-yeong on the shoulder.
No matter how much the candidate Kim Hak-gwan likes me, he won't be happy if I get involved.
"Try to get as much debt forgiveness as possible. In return, promise to acquire everything that can be revived."
"Okay."
Acquiring the entire Jungwoo Group couldn't be done in a short time.
With two experts, Eva and Han Kyung-yeong, involved, the government would have no choice but to support Han Kyung-yeong, even without my involvement.
I'll leave the public matters to them and now it's time to handle the private ones.
"Wait and see. It's going to get more interesting."
With the abolition of the interest rate cap, many loan companies from Japan began to enter the domestic market.
Even small loan companies unrelated to the Cheongpung Association started to enter Korea, seeking the tempting new market.
The legal maximum interest rate in Japan was 29.5%, and the government's supervision was stricter. Even if they only maintained high interest rates as required by the IMF, it was a good market. With the abolition of the interest rate cap, there was no reason for Japanese loan companies not to enter.
Especially, A&S Financial, established with the backing of the Yamaguchi-gumi, which was connected to the Cheongpung Association, began aggressive marketing with a Korean CEO.
A&S Financial, while a domestic entity, was essentially a Japanese loan company, with 99.97% of its shares held by the Japanese firm J&K Capital.
Due to the tight operations of domestic financial institutions, ordinary people had no choice but to borrow from loan companies, and their suffering from exorbitant interest rates was also increasing.
"We will enter the interest rate competition with A&S Financial. Offer loans at 1% lower interest rates than theirs. Especially, actively promote refinancing for those who borrowed from Rush & Money."
Hyun-seong and Kim Ho-sik listened as he slowly explained what needed to be done.
The War of Shen.
The start of a chicken game that would continue until one person collapses.
"If we could deal with them straightforwardly, it would be ideal, but if that were possible, the Japanese wouldn't have entered. I will use all the power I have. Win at all costs."
If we win this battle, we can cut off the Cheongpung Association's lifeline.