MOFAT Diamond scandal
When the company was unable to substantiate the magnitude of the diamond reserve it had previously announced, the share price plummeted to 2,000 Korean won within a matter of weeks.
Originally registered as a food distribution company specializing in pork, Koko Enterprises transitioned to a metalworking business in December 2008, laying the groundwork for its entry into the diamond mining industry.
In March 2009, Oh Deok-gyun assumed the role of chairman of the KOSDAQ-listed company and acquired another business engaged in the cutting, production, and wholesale and retail sale of diamonds.
By this time, the Ministry of Foreign Affairs and Trade had already issued a press release announcing CNK International's mining rights in Cameroon, triggering a significant surge in the company's stock price.
Initially, these reports received limited attention until the government press release drew media focus to the underlying data supporting the claimed size of the Cameroon mine.
[4] Before his death, he had highlighted the significant challenges posed by the thick soil horizons in eastern Cameroon, where the Mobilong mine is located, and the surrounding rainforest, which hindered accurate assessments of the diamond deposit.
[8] Resource diplomacy also dominated Lee’s September 2008 visit to Russia, where he met President Dmitry Medvedev and Prime Minister Vladimir Putin.
[9] In May 2008, Prime Minister Han Seung-soo visited three Central Asian nations – Uzbekistan, Kazakhstan, and Turkmenistan – as well as Azerbaijan to promote South Korea's resource diplomacy initiatives.
[11] In 2008, a South Korean consortium signed agreements with the semiautonomous Kurdish government in February and September to develop oil fields in northern Iraq.
[13] The Korea National Oil Corporation, which led the consortium, withdrew from the Kurdistan exploration block in 2016 and subsequently terminated its oil-field projects in the region.
In the issued press release, the Ministry not only confirmed the exaggerated estimate of the diamond deposit but also touted it as a success of the Lee Myung-bak government's "resource diplomacy", which caused the shares of CNK International to quintuple shortly after.
The surge in CNK International's stock price triggered an investigation by South Korea's financial regulators, which wound up in the criminal referrals of key figures to the prosecutors' office.
[15] During the trials, the prosecution presented evidence that Ambassador Kim Eun-seok had aggressively pushed junior diplomats to support CNK International Chairman Oh Deok-gyun.
[16] Furthermore, Kim Eun-seok was suspected of introducing CNK Chairman Oh Deok-gyun to high-ranking government officials, such as former Vice Minister of Knowledge Economy Park Young-joon.
Despite the acquittal on charges of stock manipulation, the Supreme Court held that his demotion was fair on the grounds that he had neglected his duty as a public servant to verify unfounded claims about the Cameroonian mine in CNK International's reports, and therefore violated the principle of trust and good faith.
On 26 January 2012, the inspection board released its findings, revealing that Kim Eun-seok had shared information about CNK International's diamond project with his siblings in 2009.
On 30 January 2012, the Seoul Central District Prosecutors' Office conducted the first-ever raid on the Ministry of Foreign Affairs and Trade, following the issuance of a search warrant.
They claimed that Kim had misrepresented the source of the diamond deposit estimates in the press release, attributing them to official Cameroonian government data when, in fact, they were derived from exaggerated CNK reports without independent verification.
On 3 February 2016, the appellate court upheld Kim's acquittal, acknowledging the factual basis of certain elements in the press release, including the involvement of the Cameroonian government in the geological survey.
The Court also noted that, despite internal opposition, Kim had created and published a second press release that falsely implied official endorsement from the Cameroonian government.
The Supreme Court concluded that Kim's actions had damaged public trust in the Ministry of Foreign Affairs and tarnished diplomatic reputation, ultimately upholding the demotion but overturning the dismissal.
