The Financial Supervisory Service (FSS) is usually not the most visible part of the South Korean government. As the country’s main inspector of financial institutions, it appears in the news usually for two reasons: Either the market is in serious trouble, or the office itself is suspected of corruption due to cozy ties to the very industries that it is supposed to regulate.
This past week the FSS has been dominating news in South Korea for a slightly different reason: its new governor Kim Ki-sik is under fire for past ethical lapses. The opposition and conservative media are calling for his sacking. The presidential Blue House, which appointed Kim, has not given up on him, though it has referred the matter to the National Election Commission to evaluate whether Kim’s failings are damning enough to warrant his resignation.
If Kim is forced out, it would be something of a blow to the government’s plans for remaking the national economy. But even if he can stay, the scandal has already damaged President Moon Jae-in’s carefully cultivated clean image.
Chaebol Reform Agenda
Moon, elected last May, has called his rise to power “the culmination of the candlelight revolution” — in reference to the so-called “candlelight protests” in the fall and winter of 2016 that led to president Park Geun-hye’s ouster over corruption allegations. The president is keen on showing himself as a champion of the masses, once saying he would consider “the will and demands of the people my compass.”
Naturally, the new administration named “eradicating accumulated evils” from conservative rule and “purging corruption” its top two policy priorities for the five-year term. Moon also made “chaebol reform” one of his key pledges. Chaebol — Hyundai, Samsung, LG, etc. — are family-controlled conglomerates that dominate the national economy. They are both widely admired (for their competitive performance on the global market and perceived contributions to South Korea’s economic growth) and resented (for their monopoly over the domestic market, labor practices and collusion with the political establishment).
With growing inequality, not to mention prominent roles in many high-level corruption scandals (think Park Geun-hye, under whom chaebol like Samsung and Lotte were giving money to dubious causes championed by her), it is something of a cliché for top-level South Korean politicians to promise they would weaken the chaebol and nurture small- and medium-sized enterprises.
Read more: “One Nation Divided Under the Chaebol”
Even Park promised “economic democratization” when she ran for the presidency in 2012, and that initiative went nowhere once she was elected. But Moon seemed to be committed, appointing Chang Ha-sung and Kim Sang-jo — two scholars known for strong critique of the chaebol — to key economic policymaking positions.
When the previous FSS head, Choi Heung-sik, resigned on Mar. 12 after only six months on the job because he was embroiled in a corruption scandal of his own — asking KEB Hana Bank to hire his college friend’s son — it was a chance for the Blue House to fill the position with someone who complemented its agenda and was beyond reproach.
Kim Ki-sik co-founded the influential progressive NGO People’s Solidarity for Participatory Democracy (PSPD) and served in the National Assembly from 2012 to 2016 as a lawmaker of the then-opposition Democratic Party (Chang and Kim Sang-jo, too, were involved with the PSPD in the past.) Kim has been dubbed a “chaebol sniper” by the conservative press for his strong views against chaebol monopoly, and appeared to be the right person to helm the FSS and curb the chaebol’s influence over financial institutions.
At least until this week.
A Flawed Candidate
Elevating Kim Ki-sik to the FSS chief position earlier this month has opened the Moon administration up to the charge of having a rather dubious moral compass. As lawmaker, Kim sat on the National Policy Committee. During that time, Kim took three overseas trips, all paid for by entities under his committee’s supervision, and evidence surfaced that not all of the travel was for conducting official business and he was clearly playing tourist at least part of the time.
On one of his overseas trips, a female intern accompanied him; subsequently she was promoted in what critics say was an abnormally quick manner, although there is no conclusive proof of inappropriate relations or illegality of her promotions. Kim is also accused of, among other things, illegally giving 50 million won from his political funds, made up of private donations, to the Korea Institute for the Future, a think tank, which he headed after stepping down from his lawmaker position in 2016.
On Apr. 10 Kim went on popular left-leaning talk show Kim Eo-jun’s News Factory to defend himself. He apologized that his conduct “may offer grounds for inviting criticism from the public’s point of view.” But he also denied the trips had been unrelated to work, and justified taking trips paid for by others as “a convention” among lawmakers when he was in the National Assembly. He added, “I am deeply remorseful [for my act] even if it had been the convention.”
The left-leaning press have shown an inclination to believe Kim, with the progressive paper Hankyoreh calling the controversy around his past an “overreach of the conservative press’s strategy.” Other government supporters have taken to social media to argue that if Kim should be disqualified from the FSS governor position, then audits should be conducted to see if other lawmakers, especially those of the conservative Liberty Korea Party, did not take similar trips.
To be fair, Kim is not accused of major infractions, and it is astounding to see the sheer quantity of articles about this scandal in the South Korean media (the country’s biggest search portal Naver shows some 8,400 articles about him as published in the past one week). The most pointed criticisms are coming from conservative press known for its pro-chaebol bias (including Munhwa Ilbo, which become notorious last month after leaked text messages showed one of its directors telling a high-level Samsung executive, “Munhwa Ilbo has seen the world through Samsung’s eyes. This will of course be true even in the future. Please help us. We are your blood allies.”)
Kim’s allies point out that Kim as FSS governor would in fact be a fearsome foe of the chaebol, and that is why conservatives are so hung up on his improprieties. If Kim remains in his position, one clear loser would be the Samsung Group, whose financial subsidiary — Samsung Securities — made headlines on Apr. 6. Instead of a cash dividend of 1,000 won (0.93 dollar) per share owned, shareholders of the firm were mysteriously rewarded 1,000 shares per every share owned. 16 Samsung Securities employees then proceeded to sell 5 million such “ghost shares” and sent the company’s share price nosediving.
The FSS is investigating how ghost shares could be issued and traded without the system’s detection. It is also looking into whether chaebol-controlled stock brokerage firms like Samsung Securities may have been manipulating the market in the past through such loopholes.
As Long As It Is Not “Below Average”
The conservative takedown of Kim Ki-sik over his conduct smacks of hypocrisy; these are the same forces that coalesced around Park Geun-hye and turned a blind eye to her corruption while her power remained strong. And the list of ethical lapses by lawmakers from the center and right of the political spectrum runs long.
But this government seems to have forgotten that its mandate is based on being better than the conservatives, and that people expect its officials to live up to a higher moral standard. The presidential office maintained for days that Kim would stay, even as progressive allies such as the Justice Party and the PSPD — which Kim co-founded — expressed disappointment at the revelations concerning him. A survey result released Friday showed the public as calling for Kim’s resignation by 51 percent, with only 33 percent opposing.
Only with mounting pressure from all sides of the political spectrum and negative public opinion did the Blue House spokesperson finally say on Friday the matter was being referred to the National Election Commission to see whether Kim’s ethical standard as lawmaker had been “below average”; if it had been just average, he would stay. Moon echoed Kim’s self-defense in an Apr. 13 statement conveyed by the presidential spokesperson: “If it had been a convention, it is difficult to accept demands for resignation.”
It was as clear an admission as any that the government was no longer pretending to be better than its conservative foes; what matters now is apparently whether its actions are not any worse than those of conservatives. A convention is acceptable even if it morally dubious.
The National Election Commission is expected to settle Kim Ki-sik’s fate early in the week, but no matter. Whether Kim survives or not, the Moon Jae-in administration has lost its moral high ground.
Editor’s Note: Kim Ki-sik resigned as FSS director on Apr. 16. This piece was also updated on Apr. 15, 6:00 p.m. KST to include more details about Kim’s alleged wrongdoings.
Cover image: Kim Ki-sik at the center of the scandal. (Source: JTBC)