Police on Tuesday raided the offices of a KT Corp. affiliate and its subcontractors implicated in an alleged large-scale loan fraud case led by a KT employee.

A financial crime unit at the Seoul Metropolitan Police Agency seized computer hard drives and account books from six subcontractors of KT ENS with a court-issued warrant.

According to the police, the manager-level employee, surnamed Kim, had taken out about 300 billion won ($279.7 million) in loans from 16 local banks with false documents since 2008.

“The scale of the fraud will become available after all 16 banks are investigated. (What we can say for now is that) the amount of damage is snowballing as we’re proceeding with the probe,” a police official said.

Investigators said Kim has been taken into custody for questioning and they will continue to track down the chiefs of the four subcontractors suspected of conspiring with Kim.

Investigators believe that Kim worked with subcontractors in fabricating receivables and holding them as security to extend the loans. The loans were then extended to a paper company established by its subcontractors.

Kim submitted fake documents with KT ENS’s official seal to the banks, including Hana Bank, which he visited three times a month on average since 2009.

Police said Kim stole the company seal during lunch hours when the office was empty. The Financial Supervisory Service said the seal was real, while the documents submitted were fake.

Investigators said Kim claimed the total amount of the loan fraud is around 230 billion won, while the watchdog believes it may reach more than 400 billion won in total.

The blame game between the networks firm and banks has already begun, with both sides denying involvement in the alleged crime.

“We assume that the recent loan fraud was done by an individual. (KT ENS) has never issued receivables that the financial firms claim,” the firm said in its official statement last week.

An official from Hana Bank told the media that it executed the loan based on the high credibility of its parent company and the country’s No. 2 mobile carrier KT Corp.

Investigators have also raised suspicions that Kim may have conspired with other employees in the firm who are well aware of such business practices.

“The large-scale crime could not have been done alone without the help of experts, considering the complex loan procedure and dubious cash flow between KT ENS and its subcontractors,” a high-ranking bank official told Yonhap on Tuesday.

South Korea’s financial watchdog launched a probe into seven of the involved banks last week for any rule violations or abnormal practices in the incident.

The FSS said the case will not result in losses from the banks as they were guaranteed by other financial companies.

The case surfaced after a string of incidents involving financial organizations that drew public criticism over their lax management. Last month, a massive data leak at three credit cards was disclosed, illustrating the data protection problems plaguing financial institutions.

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