The head of a top South Korean food and entertainment conglomerate, CJ Group, presented himself to prosecutors to face questioning over alleged tax evasion and embezzlement

June 25, 2013, 4:55 PM

Chaebol Leader Answers Summons: A Familiar Scene

By Jaeyeon Woo

South Korea’s CJ Group chairman Lee Jae-hyun appears at the Seoul Central District Prosecutors’ Office in southern Seoul on Tuesday. The head of a top South Korean food and entertainment conglomerate, CJ Group, presented himself to prosecutors to face questioning over alleged tax evasion and embezzlement.

The tense-looking head of the large conglomerate slowly made his way to answer a prosecutors’ summons through a throng of reporters.

“I am sorry for causing concern to the public,” he said. “I will sincerely respond to the investigation.”

It’s an all-too-familiar scene in South Korea. Tuesday’s tableau could have involved any of a dozen business leaders, but in this case, it was 53-year-old CJ Group Chairman Lee Jae-hyun. He didn’t have anything else to say to the media, and his legal representative couldn’t be reached by The Wall Street Journal.The Supreme Prosecutors’ Office in Seoul alleges Mr. Lee evaded taxes to the tune of 51 billion won, or $44 million, embezzled 60 billion won and lost CJ Group, the country’s 20th-largest conglomerate by assets, 35 billion won stemming from the purchase of two buildings in Tokyo. Mr. Lee also is suspected of owning several bank accounts under someone else’s name to use as slush funds.

The summons came about a month after prosecutors raided the group’s headquarters and–a few days later–Mr. Lee’s residence.

Mr. Lee’s role models include Samsung Electronics’ Lee Kun-hee, Hyundai Motor Group’s Chung Mong-koo and Hanwha Group’s Kim Seung-youn. All have been investigated by prosecutors at least once, and all have been convicted.

Most recently, Chey Tae-won, the chairman of SK Group, South Korea’s third-largest business group, was sentenced to four years in prison in January after being found guilty of embezzling 46 billion won.

The Lee probe is unusual in that this is only the first time he has been the object of suspicion, so it has attracted especially avid attention from the media and public alike.

Many also see the case as a litmus test for President Park Geun-hye who has made reining in the power of the country’s conglomerates, or chaebols, one of her top priorities.

Samsung founder Lee Byung-chull started a small food-processing factory in early 1950s that became the basis of the current CJ Group, which split off from its erstwhile parent in 1993.

Lee Jae-hyun, a grandson of the late founder and a nephew of Samsung’s Lee Kun-hee , owns 43.3% of CJ Group, which has branched out from food and beverages to entertainment and media. The chaebol’s revenue last year totaled 26.8 trillion won, or $23 billion.

Even if Mr. Lee is convicted, he would likely have a good job to come back to, unlike most ex-convicts, if the precedent set by other chaebol leaders holds. Most of them retained their positions despite their convictions.