MBN Facing Administrative Sanctions... Chairman Jang Daehwan's Statement to the Korea Communications Commission

[Asia Economy Reporter Koo Chae-eun] Ahead of the Korea Communications Commission's decision on the administrative sanctions for MBN's violation of the Broadcasting Act, Jang Dae-hwan, Chairman of the Maeil Business Newspaper Group, pleaded for leniency, considering the viewers and MBN employees.

On the 28th, the Korea Communications Commission held a plenary meeting at the government Gwacheon office to listen to the opinions of representatives regarding the administrative sanctions against MBN, which is suspected of illicit capital funding. Chairman Jang and MBN CEO Ryu Ho-gil attended the hearing.

In his opening remarks, Chairman Jang said, “I apologize for the company’s wrong judgment during the process of raising capital for the general programming PP in 2011, which led to a hearing, and I ask for leniency considering the viewers and MBN employees.”

Chairman Jang admitted to the facts related to the illicit capital funding at the time of initial approval. He stated, “We planned to raise 395 billion KRW, but actually fell short by 56 billion KRW, so we used employees as nominal shareholders to pay in the capital, and I acknowledge all these facts. At that time, the newspaper company’s shareholding ratio was less than 30%, so it could have invested sufficiently, but due to the shareholding restriction regulations, additional investment was difficult. There were many difficulties as four general programming channels simultaneously raised about 1 trillion KRW in investment funds.” He added that in November 2011, to resolve the issue of employees as nominal shareholders, employees tried to directly borrow from financial institutions to rectify the illegal acts.

Regarding the violation of the newspaper company’s ownership restriction under the Broadcasting Act, he said they intend to resolve it as soon as possible, but it is difficult to find substitute investors due to the risk of administrative sanctions. As of July this year, Maeil Business Newspaper’s stake in Maeil Broadcasting is 32.64%, violating Article 8 of the Broadcasting Act’s ownership restriction. On the timing of recognizing the illegal act, Chairman Jang said, “At the time of initial approval, I was not aware of the illegal act, and I received a direct report from Vice Chairman Lee Yoo-sang around August 2018 during the Financial Supervisory Service investigation.” However, the Korea Communications Commission was not informed about the investigation that began in August 2018.

Earlier, it was revealed that when MBN launched as a general programming channel in 2011, it borrowed about 55 billion KRW from banks under nominal loans and had employees purchase company shares under their names to meet the minimum paid-in capital of 300 billion KRW, constituting nominal investment. MBN is facing administrative sanctions for this. Additionally, MBN committed accounting fraud by not reflecting this in the financial statements. The Financial Supervisory Service concluded this was intentional accounting fraud. MBN underwent reviews including nominal capital during its initial approval as well as re-approvals in 2014 and 2017. Consequently, the prosecution indicted MBN executives, including Vice Chairman Lee Yoo-sang of Maeil Media Group and Co-CEO Ryu Ho-gil, in the first trial on July 1, charging them with violations of the Commercial Act and Capital Markets Act related to improper capital funding, and they received suspended prison sentences.

Currently, the Korea Communications Commission is reportedly considering three options for administrative sanctions against MBN under Article 18 of the Broadcasting Act: △cancellation of approval △six-month suspension of broadcasting △six-month suspension of advertising. The Commission is likely to make a decision on administrative sanctions on the 30th ahead of MBN’s re-approval next month.

This content was produced with the assistance of AI translation services.