Prosecutors begin raids as South Korea launches tax probe into powerful chaebols

May 29, 2013 3:25 pm

Prosecutors begin raids as South Korea launches tax probe

By Simon Mundy in Seoul

Prosecutors raided the home of one of South Korea’s most prominent businessmen on Wednesday, amid growing scrutiny of offshore financial arrangements made by the country’s corporate elite.

The search of the Seoul residence of Lee Jay-hyun, chairman of the conglomerate CJ Group, was part of an investigation into “allegations of tax evasion through overseas bank accounts”, the company said, while declining to comment further. Mr Lee was not available for comment.

Meanwhile, the authorities said they had launched a probe into 23 companies and individuals suspected of tax evasion through shell companies in tax havens.There has been growing international controversy in recent weeks over the use of offshore financial arrangements to avoid tax, spurred in part by the International Consortium of Investigative Journalists’ release of data showing investments in tax havens. Last week a Seoul-based partner of the ICIJ said that it had identified 245 South Koreans who had set up companies in tax havens.

The announcement attracted heavy publicity in South Korea, where public opinion has become increasingly critical of the country’s powerful conglomerates, or chaebol, as economic growth has slowed.

Park Geun-hye, president since February, has responded by putting “economic democratisation” at the heart of her policy platform, promising to tackle bad practices among the chaebol. This has included a pledge to abandon the sometimes lenient approach to high-level corruption of her predecessor Lee Myung-bak, who repeatedly pardoned corporate bosses convicted of embezzlement and tax evasion, including the chairmen of Samsung Electronics and Hyundai Motor.

Ms Park has also promised to strengthen tax collection, although her statements on the subject have focused more on regularisation of the informal sector than on tax dodges on the part of the chaebol. Improved collection of taxes would help Ms Park to meet her ambitious promise to implement Won135tn ($119bn) of social spending over the next five years, without increasing public debt or most tax rates.

NewsTapa, which partnered with the ICIJ to investigate use of tax havens by South Koreans, plans to publish details of its findings gradually over the coming months. Several current and former executives of some of the country’s major groups have been named in the first releases.

“I view this as just the tip of the iceberg,” said Shin Won-gi of People’s Solidarity for Participatory Democracy, a civic group. “Korean tax authorities have not taken enough measures on the conglomerates in the past.”

The investigation into CJ Group had begun before NewsTapa’s announcement last week, and centres on allegations that Mr Lee evaded tax by funnelling money to secret offshore accounts. Five years ago, Mr Lee was ordered to pay Won170bn relating to accounts held under different names, but he was not prosecuted for tax evasion.

CJ Group, which covers sectors ranging from pharmaceuticals to entertainment, was part of Samsung Group until 1997, and Mr Lee is the grandson of Samsung founder Lee Byung-chul.

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 (, 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.

6 Responses to Prosecutors begin raids as South Korea launches tax probe into powerful chaebols

  1. Pingback: Help Expose Tax Cheats

  2. Pingback: Offshore Tax-Haven Data Made Public As Companies Brace For Scrutiny | Celebrity News & Alerts

  3. Pingback: Help Expose Tax Cheats | Tiggio Blogs and More

  4. Pingback: Help Expose Tax Cheats | Political Ration

  5. Pingback: Forbidden News » Offshore Tax-Haven Data Made Public As Companies Brace For Scrutiny

  6. Pingback: Help Expose Tax Cheats | Treilo News

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: