[Newsmaker] Diamond mine fraud probe reopens

Korean mine developer Oh Deok-gyun, a key figure in a multimillion-dollar stock manipulation scandal, was arrested Wednesday after two years of hiding in Cameroon.

The 48-year-old entrepreneur was accused of allegedly acquiring about 90 billion won ($83.2 million) in profits by exaggerating the value of diamond reserves at a mine in Cameroon.

“Criminal charges against Oh have been acknowledged and there is a possibility of the suspect fleeing or attempting to destroy evidence,” the Seoul Central District Court said in reviewing the validity of his arrest warrant.

His lawyer, Cho Seung-sik, expressed regret, saying that “CNK made a great effort to make a profit in Cameroon (through the project), but the government put the company in trouble rather than helping.”

The arrest of the suspect will likely give fresh impetus to the investigation, which was unable to progress for the past 13 months after the prosecution and Interpol failed to locate Oh’s whereabouts.

Investigators are now hoping that Oh’s arrest will provide a new lead on uncovering the true estimate of diamond reserves in the mine, government officials’ involvement in the deal awarded to the firm, and their role in the alleged rigging of stock prices.

The case traces back to 2010, when Cameroon offered the rights to a diamond mine in its southeastern region to CNK’s parent firm, C&K Mining.

Winning the mining rights coincided with the Lee Myung-bak administration’s drive to secure overseas resources.

The government, knowing that it could bring massive economic gains and give coherent direction to its diplomatic policies, was believed to have played a role in promoting the deal.

In December 2010, the Foreign Ministry announced the developments in a press release, which apparently exaggerated the mine’s diamond reserves, stating that they stood at 420 million carats. In less than a month, CNK’s stock price shot up from around 3,000 won to 16,100 won a share.

After suspicions arose that CNK officials had overstated the amount of diamonds buried in the mine in an attempt to boost stock prices, the ministry gave out another press release reaffirming the diamond reserves estimate in June 2011. And again, the stock price went up.

While the prosecution is expected to further investigate CNK’s suspected lobbying of politicians, two high-ranking government officials have been released for lack of evidence.

They are former Energy and Resources Ambassador Kim Eun-seok, who was accused of asking the Cameroon government to give the mining deal to CNK International, and former Vice Minister of the Prime Minister’s Office Park Young-joon, who was accused of composing the exaggerated report of the Cameroon mine.

Investigators noted that Oh would face trial soon, along with Chung Seung-hee, the director of CNK, who also turned himself in last year.

By Suk Gee-hyun (monicasuk@heraldcorp.com)