Korean chaebol CJ Group is under a prosecution investigation over an alleged slush fund

CJ hit by slush fund probe

2013-05-21

By Kim Jae-won prosecutors target chairman, raid offices

Prosecutors on Tuesday raided CJ Group’s Main Office and Affiliate firms, along with The Homes of a Number of executives in What appears to be an Investigation targeting Chairman Lee Jay-Hyun who is Suspected of Running a Slush Fund. 
It is The first such RAID against a big conglomerate by the Park Geun-hye government and could spread to include other chaebol firms. CJ was originally a part of the Samsung Group. It has business activities in food, media and entertainment, 

Lee is suspected of siphoning off 7 billion won in slush funds through bogus transactions using its overseas operations in order to channel the money home.  

“We are looking into slush fund allegations Involving the group, “said Hong Hyo-soon, an official of the prosecutors’ office. Dozens of investigators from the Seoul Central District prosecutors’ Office participated in the raid, Hauling away from computer files and disks, and the financial ledgers and documents 

the prosecutors are focused on establishing whether and how the group dodged corporate and income taxes while bringing money from the slush fund into the country. Believe that they Created The Funds Group through The Front Which companies The company set up in foreign countries. 

A prosecutor confirmed that The Investigation is ongoing Involved in Tax Dodging schemes targeting individuals, implying that they are after Chairman Lee. 

If Lee is The target, he will once again become the subject of probe by prosecutors. He was also believed to be behind litigation aimed last year at disputing an inheritance received by Samsung leader Lee Kun-hee, who is the younger brother of Maeng-hee. Lee is The Only son of Lee Maeng-hee, The Oldest son of The Late Samsung Group Founder Lee Byung-Chull. 

He was also at The Center of a bizarre Attempted Murder case involving his Financial Assistant, who allegedly managed Lee’s money to The Tune of 170 billion won. 

The Assistant The money invested in some of Developing hot Springs but went SOUR When The Deal, The Assistant Hired a Hit man to allegedly kill a Partner out of fears that HE The Source of The money would divulge. 

The case went to The Supreme Court but Whether The Funds were Part of Lee’s Slush Funds was Not Clearly Established. 

This time, The Korea Financial Intelligence Unit, The State Financial information Agency, detected odd Trails of money between CJ and its Paper firms and alerted prosecutors about them .   

Slush Funds The prosecution suspects The Group raised by Trade Documents and Invoices through forging Front Overseas companies set up, disguised as if they bought from CJ Products Group units and raw materials in Seoul. 

The food and Entertainment conglomerate is also USED Suspected of having Borrowed -name bank accounts for dubious financial deals. This would be a Breach of The Real name Financial law, Introduced in 1993, The use of Requires that all Financial transactions in Real names. 

Meanwhile, industry watchers fear that The CJ investigations Will be The start of a sweeping probe against conglomerates, saying that there are already rumors about who will be next in line. 

2013-05-21 16:47

CJ specializes in food, entertainment

By Kim Rahn

CJ Group, which is under a prosecution investigation over an alleged slush fund, is a conglomerate covering various businesses in cultural fields, ranging from food and restaurants to logistics and entertainment.

Group Chairman Lee Jay-hyun is the son of Lee Maeng-hee, former Cheil Fertilizer chief and eldest son of Samsung Group founder Lee Byung-chull.

Lee Maeng-hee gave up his management role after his brother, Samsung Electronics Chairman Lee Kun-hee, took over Samsung’s control. Lee Jay-hyun has been leading CJ Group together with his maternal uncle, Sohn Kyung-shik, who is also chairman of the Korea Chamber of Commerce and Industry.

Lee Jay-hyun’s sister, Lee Mi-kyung, is vice chairwoman of CJ E&M, a media content arm of CJ Group.

As of last year, the group had 223 affiliates including overseas ones.

They include six KOSPI-listed firms ― CJ Corp., CJ CheilJedang, CJ CGV, CJ Seafood, CJ Korea Express and CJ HelloVision ― and three KOSDAQ-listed affiliates ― CJ O Shopping, CJ Freshway and CJ E&M ― along with non-listed firms such as CJ Foodville and CJ Construction.

The group also has 140 overseas corporations in countries including China, Japan, Indonesia, Singapore, Australia, the United States, Brazil, Germany, Russia and Britain.

It recorded 26.8 trillion won in sales last year.  

Prosecutors suspect the group set up special purpose companies overseas to evade tax and raised slush funds worth 7 billion won through bogus deals.

The group has three special purpose companies, two in Korea and another in the British Virgin Islands, a tax haven.

CJ Group was separated from Samsung Group in 1993, with the legal issues for separation finishing in 1997.

But the two groups are in dispute. Last year, it was alleged that Samsung workers tailed Lee Jay-hyun; Lee Maeng-hee and Lee Kun-hee have been in a legal battle over their inheritance; and the two estranged brothers held memorial services for their late father separately last year.

CJ recently adopted an emergency strategy following a steep decline in profits of its key affiliates including CJ CheilJedang. The group is considering closing some of its money-losing businesses while looking for new cash-cows.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

One Response to Korean chaebol CJ Group is under a prosecution investigation over an alleged slush fund

  1. adam says:

    Where can I find a credit rating for CJ Group?

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