Prosecutors failed to secure the custody of Kim Byung-ju, chairman of MBK Partners, for whom they requested an arrest warrant on suspicion of fraud and other charges. On the 14th, the court dismissed the warrant, saying, "It is difficult to see that the allegations have been substantiated to the extent of requiring detention." At a pretrial detention hearing (substantial review of the warrant) that lasted more than 13 hours the previous day, MBK presented more than 100 PowerPoint (PPT) slides and stressed the need to guarantee the right to a defense. The decision is seen as the court finding that, given the procedural limits at the warrant review stage, an investigation without detention is appropriate.
Park Jeong-ho, a Director General judge in charge of warrants at the Seoul Central District Court, on this morning dismissed all arrest warrants for four key MBK executives, including Chairman Kim. Park said, "It is clear the damage from the case is very serious, but the substantiation of criminal allegations is insufficient to the level of detention," explaining the reason for dismissal. The intent is that there is a need to fully guarantee the right to a defense for Chairman Kim and others without detention.
According to legal sources, the substantial review of the warrant began at 10 a.m. the previous day and continued until 11:40 p.m., lasting a total of 13 hours and 40 minutes. It is the longest on record since the warrant review system was introduced in 1997.
First, prosecutors presented more than 100 PPT slides to explain the seriousness of the criminal allegations against Chairman Kim and others and the need for detention. The prosecutors' substantiation reportedly continued until around 2 to 3 p.m.
Prosecutors viewed that from late 2023, Chairman Kim and other key MBK executives directly received reports on Homeplus Co.'s operating losses and, at the latest by mid-Feb., recognized the possibility of a credit rating downgrade. The actual downgrade took place on Feb. 28.
After the prosecutors finished, the MBK defense team delivered prepared remarks. Centered on Kim & Chang, MBK reportedly presented more than 100 PPT slides and refuted, point by point, the prosecutors' application of charges and suspicions.
MBK's position is that it recognized the credit rating downgrade of Homeplus Co. at about 3:38 p.m. on Feb. 25. If it had known in advance about the possibility of a downgrade, it would have had no reason to express its intent during the credit rating re-evaluation process to support a 100 billion won credit line (credit facility). It is also said to have stated that sales and the liability ratio were improving at the time, and the sale of Homeplus Express was proceeding smoothly, making it difficult to anticipate a downgrade.
Regarding the suspicion that MBK prepared a rehabilitation plan for Homeplus Co. starting in Nov. 2023, it appears to have conveyed the position that "it was to prepare for a potential failure of borrowing fund refinancing (refinancing)." After the refinancing was successfully completed in May the following year, it said it neither reviewed rehabilitation proceedings nor received related advice.
It also reportedly denied allegations that it concealed financial deterioration and deceived financial institutions and investors through false disclosures. This concerns the claim that when Homeplus Co. borrowed 100 billion won from Hanwha Investment & Securities in Dec. 2023, MBK did not note in the financial statement footnotes that it provided a joint guarantee.
MBK is said to have explained that a shareholder's joint guarantee and credit enhancement are positive factors in credit evaluation, and that in practice there are cases where such sensitive information, which is subject to contractual confidentiality clauses, is not shared with all stakeholders. This is because formalizing the credit enhancement could lead other portfolio companies to make similar guarantee demands.
After the prosecutors' substantiation and the MBK defense team's remarks concluded, the court's questioning and the suspects' statements followed. At that time, Chairman Kim is said to have personally stated to the effect that "all allegations are completely denied."
After completing the warrant review, the court, after much deliberation, dismissed the warrant request. It considered that at the warrant review stage, it is difficult for a suspect to sufficiently access evidence submitted by prosecutors and to fully present defense arguments.
The assessment is that the fact Chairman Kim has relatively cooperated with the investigation also influenced the dismissal of the arrest warrant. After returning via Incheon Airport in May last year, when the prosecution's investigation began, Chairman Kim has been under a travel ban while being investigated, and appeared as a witness at the National Assembly's audit on Oct. 14 last year. The court also said, "Rather than a need for detention due to concerns about destroying evidence or flight risk, there is a need to fully guarantee the right to a defense without detention."
With the dismissal of the warrant, efforts to secure the custody of Chairman Kim and others were halted, but prosecutors plan to continue a reinforced investigation by securing additional evidence. They are expected to decide later whether to indict and contest the charges against Chairman Kim and others in a trial on the merits.