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Tong Yang victims sue firm, gov't over losses

All Headlines 15:00 January 21, 2014

SEOUL, Jan. 21 (Yonhap) -- Nearly 800 people filed class action lawsuits against Tong Yang Group and the government Tuesday, seeking compensation for losses incurred from fraudulent commercial paper (CP) issuance by the financially troubled conglomerate.

According to the five lawsuits lodged with the Seoul Central District Court, 779 plaintiffs demand a combined 32.6 billion won (US$30.6 million) in compensation from the firm and the financial authorities.

The country's 38th-largest conglomerate is under suspicion of fraudulently issuing corporate bonds and CP worth over 2 trillion won since around 2007 and deliberately filing for court receivership for its five affiliates last October, inflicting heavy losses on investors.

"We hold the company responsible for incurring financial losses on the investors, and the financial authorities for neglecting their duty to oversee this," the plaintiffs said.

The firm's embattled chief, Chairman Hyun Jae-hyun, is currently behind bars on charges of fraud, breach of duty and embezzlement.

State prosecutors alleged that Hyun planned and directed the issuance of the corporate bonds and CP even though he knew of the high risk of its affiliates failing to repay maturing debts.

"The plaintiffs will focus on proving that not only the conglomerate but also the financial authorities are liable for compensation," said the Financial Consumer Agency, a local consumers' group that filed complaints on behalf of the victims.

The group claims that the government had failed to prevent investor losses even with prior knowledge back in 2006 that Tong Yang affiliates lack creditworthiness.


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