Prosecutors are investigating Hyosung Group Chairman Cho Suck-rae for allegedly creating a massive slush fund and evading taxes

2013-10-02 17:11

Hyosung under prosecutors’ probe

By Kim Tae-jong

Prosecutors are investigating Hyosung Group Chairman Cho Suck-rae for allegedly creating a massive slush fund and evading taxes, sources said Wednesday.
The move could potentially result in Cho becoming yet another ill-fated conglomerate owner who may be put on trial and jailed, following Hanhwa Group Chairman Kim Seung-youn, SK Holdings Chairman Chey Tae-won and CJ Group Chairman Lee Jae-hyun.The investigation was started by the prosecution after the National Tax Service (NTS) discovered during a recent audit of the group that Cho dodged paying taxes by manipulating account books.

“Special Team II at the Supreme Prosecutors’ Office took the case, which means they are highly likely to investigate not only the group’s alleged tax evasion but also the chairman’s slush fund creation,” an industry insider said.

Conventionally, a tax team at the prosecutors’ office is in charge of cases handed over by the NTS but the special team tends to look into big and sensitive crimes at the request of the prosecutor general, he said.

The team previously investigated CJ Group and prosecuted its chairman on charges of embezzlement, tax evasion and breach of trust.

The mobilization of the team also came as a surprise as it was expected to be delayed because of the recent resignation of Prosecutor General Chae Dong-wook. This development has led observers to believe that the prosecution has perhaps been closely monitoring Hyosung.

The prosecution downplayed the meaning of the team taking up the case.

“This is just a normal process without any hidden intentions,” a prosecutor said. “But of course, we will dig up more if we find other charges during our investigation into the group.”

The prosecution will first focus on the group’s alleged tax evasion worth hundreds of billions of won.

It is alleged that the country’s 26th largest conglomerate manipulated its accounting records to create losses from its overseas businesses in the wake of the 1997-98 Asian financial crisis, through which it dodged due taxes.

The NTS also found that Cho’s family hid 100 billion won worth of assets under “borrowed names” to avoid taxes.

In June, just two months after its probe into the group, the NTS requested a travel ban on the chairman as well as other Hyosung executives, who are suspected of aiding Cho.

Market insiders say the probe into Hyosung is part of the Park Geun-hye administration’s intensive crackdown on irregularities at chaebol, especially those believed to have received favors from the previous government.

Cho is related to former President Lee Myung-bak through the marriage of his nephew to Lee’s daughter. When Lee was in power, Cho led the big-business lobby group, the Federation of Korean Industries.

The recent crackdown and harsh punishment of conglomerates and their affiliates’ leaders have drawn protests from the business community.

“The absence of leadership can become a major setback to companies and also the Korean economy,” an official from a conglomerate said. “Crimes should be punished, but amid anti-conglomerate sentiment, chaebol owners have received punishments that are harsher than necessary.”