Daewoo corruption scandal deepens

A buyer is wanted for heavily-indebted Daewoo Motor

By the BBC's Caroline Gluck in Seoul

South Korean prosecutors are seeking court arrest warrants for a further five top executives of the collapsed Daewoo group.

The five, including the head of the group's trading arm, will face charges of fraud and diverting the group's finances abroad.

Three other former executives of the ailing Daewoo group were arrested on Thursday, accused of involvement in an accounting fraud involving tens of billions of dollars.

The Daewoo group collapsed in August 1999 under $80bn of debt, leaving local banks with huge unpaid debts.

In search of transparency

The move comes just a day after the country's deputy prime minister, finance minister Jin Nyum, stressed the government's determination to push ahead with its final phase of reforms.

This included restructuring the public financial, corporate and labour sectors to ensure transparency in business and restore international confidence in the economy.

The first three former executives to be arrested were accused of falsifying the accounts books of five affiliates of the Daewoo group, once the country's second largest conglomerate.

The accused were named by prosecutors as Yang Jae-yeol and Chun Joo-bum, both former chief executives of Daewoo Electronics and Yoo Ki-bum, former head of Daewoo Telecom.

It is alleged that they concealed debts and exaggerated assets by about $19bn in order to get badly needed bank loans shortly before the parent Daewoo group collapsed.

More arrests likely

Prosecutors say further arrests are likely as many other former Daewoo executives and accountants are currently under investigation.

The arrests came four months after South Korea's financial watchdog asked prosecutors to file charges against Daewoo's founder, Kim Woo-Choong, who has since fled abroad, and 40 other executives for their involvement in massive fraud.

While the investigations continue, Daewoo's creditors are struggling to sell off the company's debt-laden subsidiaries, including Daewoo Motor, once the country's second largest car maker, to a foreign buyer.

Daewoo was once a symbol of the country's economic expansion. But its economic woes have now placed a huge burden on the government as it attempts to introduce transparency into the way the country's corporations conduct their business and restore confidence into the economy, which was badly hit by the Asian economic crisis three years ago.