The chief executives of the firms behind two large-scale real estate projects in Cambodia have been sentenced to jail in Seoul for obtaining illegal loans and using the money to finance fictitious companies abroad, according to a South Korean court official.
The two executives were among a long list of officials at the Busan Savings Bank that were sentenced last month in South Korea for their involvement in allocating illegal loans and paying of government officials to cover it up.
Lee Sang-ho, CEO of World City Co Ltd-the firm behind the $2-billion CamKo City satellite city in Phnom Penh’s Russei Keo district, which is currently stalled-was sentenced to five years in prison on Feb. 21, Cho Won-kyong, information officer at the Seoul Central District Court said in an email on Wednesday.
The second man to be sentenced was Lee Tae-hwan, CEO of NSRIA Co Ltd, which is behind a $1-billion airport project in Siem Reap province, which has not yet broken ground, Mr. Cho said.
“[T]hey were punished for breach of trust in the process of getting a loan from Busan Savings Bank for Phnom Penh new city development project and Siem Reap new airport development project in Cambodia etc [sic],” he said.
Also among those to be arrested last month was Park Yeon-ho, the former chairman of Busan Savings Bank, who received a seven-year jail term, as well as Kim Hae-soo, who served as an aide for South Korean President Lee Myung-bak between 2008 and 2010.
In June, South Korean officials said prosecutors had widened their investigation from illegal loans at the bank to investments in Cambodia. At that time, construction on the 120-hectare, 6,000-unit CamKo City had stopped. As of yesterday there was still no construction work going on at the site in Russei Keo district.
Kheng Ser, assistant to World City’s vice president, claimed he was unaware of the sentencing.
“I do not know because this is in Korea. We do not have any information here [in Cambodia],” he said, adding that the sentencing of World City’s CEO would not affect progress of the CamKo City project.
Without the project’s main investor, companies from Vietnam, China and Japan are now looking into taking over the CamKo project, said Sung Bonna, president of Bonna Realty, whose firm is involved in finding new capital for the venture.
“There are a lot of international parties interested in investing, [and] who are waiting to take over,” he said.
The Siem Reap airport project by NSRIA has also ground to a halt even though the firm had initially announced that it would break ground in mid-2011. The proposed mega project is supposed to include a special economic zone and a new city, and the airport would process up to 15 million passengers a year when completed.
Secretary of State at the Council of Ministers Tekreth Samrach, who leads a government steering committee on the proposed airport project, said he was not aware that NSRIA’s CEO had been sentenced to jail in Korea, and added that the project would still go ahead.
“The problem of the company is not the problem of the project,” Mr. Samrach said, adding that construction would begin in April or May. “The company is dealing with financial problems. One bank [Busan] collapsed, they need to find another new bank.”
Sunny Soo, country head of the global realtor Knight Frank, said the developments could survive the loss of the CEOs.
“It depends,” he said. “If it doesn’t reach outside these two people, there can just be a change of management. It doesn’t mean the projects don’t have a chance.”
Still, Mr. Soo said that attracting new investors could prove tricky if information on the project’s former investors proves hard to access.
“It could have some negative impact if it is in the case of receivership, when corporate transparency and image is important,” he said.
(Additional reporting by Hul Reaksmey)
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