Korean prosecutors raided the homes and offices of top executives of Hyosung Group in an investigation into allegations that the country’s 26th largest conglomerate has engaged in tax evasion and breach of trust for about a decade

Raids hit Hyosung homes, offices

Tipped off by tax men, prosecutors seek clues in ‘massive fraud’

Oct 12,2013

The prosecution yesterday raided the homes and offices of top executives of Hyosung Group in an investigation into allegations that the country’s 26th largest conglomerate has engaged in tax evasion and breach of trust for about a decade. Around 60 prosecutors and investigators from the Seoul Central District Prosecutors’ Office were sent to 10 locations yesterday morning for the raids. The headquarters of Hyosung Group and its financial arm, Hyosung Capital, as well as the homes of Hyosung Chairman Cho Suck-rai and other senior executives, were raided starting at about 7:30 a.m.Searches and seizures also took place at the homes and offices of Cho’s three sons. The eldest son, Cho Hyun-joon, is president of Hyosung Group; the third son is the vice president. The second son, Cho Hyun-moon, resigned from his job as vice president of the group in February.
The nation’s tax agency charged the 79-year-old tycoon with leading tax evasion schemes and creating massive overseas slush funds. After conducting tax audits since May, the Seoul Regional Tax Office concluded that the conglomerate had committed corporate tax evasion on a massive scale.
The National Tax Service said it suspected that Hyosung had been cooking its books for a decade to cover up losses incurred during the 1997 foreign exchange crisis. Through 1 trillion won ($933.5 million) worth of creative accounting, the group allegedly evaded hundreds of billions of won in corporate taxes.
The tax service last month asked the prosecution to investigate; prosecutors obtained the data compiled by the tax agency on Monday.
Prosecutors also believe that the conglomerate used its overseas branches to hide tens of millions of dollars that it borrowed from Korean banks, using accounts in tax havens. The hidden funds were used to deal in stocks in the Korean market, and the conglomerate also evaded the capital gains taxes on the profits.
During this process, Cho family private funds were mixed in with the corporate money and slush funds were raised, the prosecutors believe. The tycoon’s family was also allegedly involved in a series of illegal financial transactions using third parties’ names.
Hyosung Capital, the group’s financial arm, is also suspected of providing up to 30 billion won of illegal loans to the Cho family and to other senior executives.
With more than 11 trillion won of assets, Hyosung is the country’s 26th largest conglomerate. Chairman Cho’s younger brother, Cho Yang-rai, is Hankook Tire’s chairman and is related by marriage to Korea’s former President Lee Myung-bak.
Hyosung Group yesterday issued a statement saying it would cooperate with the prosecution’s investigation but denied allegations that the Cho family had managed slush funds of over 100 billion won since the 1990s. The group said the family had owned shares in the conglomerate in other people’s names since the 1970s in order to protect themselves from a possible hostile takeover attempt.
The group also said the charges of a 10-year-long accounting scam were linked to its efforts to turn around its business without receiving bailout funds.
The conglomerate said it tried to use its profits over the decade to make up for the losses incurred during the financial crisis and argued that no proceeds from the transactions were used for private gain by the owner’s family.
BY SHIM SAE-ROM, SER MYO-JA [myoja@joongang.co.kr]

2013-10-11 17:02

Hyosung under fire

 Cho chairman looks set to join troubled chaebol owner
By Kim Jae-won
Fight The Hyosung Group tried to back an onslaught by prosecutors Friday afternoon but appeared to be a half-IT Baked BID that was likely to Not Affect The Course of The Investigation.
Hours after raids on the residence of Cho Suck-rae, its chairman, and its main office in Mapo, western Seoul, Hyosung issued a statement, denying allegations of accounting fraud and tax dodging. The probe is set to Expand even further.
Despite Hyosung’s Claims, The ongoing probe CAN be seen in a broader perspective on Two accounts.
First, Serious investigations into Hyosung have been Delayed During The previous Administration LED by President Lee Myung-bak.
Secondly, the current Park Geun-hye government has so far not acted in any way that shows any affection toward her predecessor, although the two are from the same conservative Saenuri Party. Besides, Park and Lee had run-ins. According to Political watchers Their Relationship Remains soured.
“There are no Limits on Our effort to make justice Prevail,” a senior presidential Aide said, Talking broadly about Park’s anti-corruption Drive.
In other words, The Hyosung case CAN be a case that The Park Camp CAN vigorously pursue without being “misunderstood” as a Political vendetta.
How Hyosung and its leader with a history of Cancer Remains to be seen Will Cope with IT.
Particularly Park has rarely appeared to be Kind to chaebol. Already SK leader Chey Tae-won is in Jail and Jay-Hyun Lee, chairman of CJ Group, and Hanwha Group Chairman Kim Seung-youn are furloughed for Sickness.
chaebol Another Head, who served as chairman of The English Federation of Industries (FKI ), The Big Business lobby, has his Fate hanging in The balance.
Earlier in The Day, The Seoul Central District prosecutors’ Office (SCDPO) said that IT Sent 60 prosecutors and investigators to The Group’s Main Office in Mapo, Western Seoul, and Obtained accounting books and other Documents.
Former President Lee’s third daughter Soo-Yeon is a daughter-in-law of Cho’s Younger brother Yang-Rai, chairman of Hankook Tire.
“Tax Evasion is Extremely selfish Behavior Which Damages The Community of this Country. It should be rooted out, “said The President in a Meeting with her ​​secretaries at Cheong Wa Dae Last week.
The government has been in dire need of collecting More Tax revenues to Support Park’s welfare Policies Which require a trillion won of additional Income.
The probe comes after the National Tax Service (NTS) filed a complaint against Cho Suck-rai for allegedly leading the tax evasion scheme through various illegal methods. Last week, The prosecution Office Obtained a local Tax Office’s probe Data.
“We completed The Tax audit on Hyosung and handed over The Related Documents to The prosecution,” said a high-ranking NTS Official Asking Not to be named.
prosecutors also swooped down on The Houses of Chairman Cho and Several executives, they Added, without giving further details.
The Family-owned conglomerate had allegedly evaded Corporate taxes worth 1 trillion won ($ 900 million) for The Past 10 years since 1997 through an accounting Fraud, According to The Tax Office that had Conducted audit into a Special Group for The Beginning months in May.
Cho is further accused of Shares Holding More than 100 billion won worth Borrowed names under Transfer and Income since The 1990s to evade taxes, IT said.
The authorities have already banned Cho and two others – the chairman’s key aide surnamed Koh and the group’s Vice Chairman Lee Sang-woon – from leaving the country pending the results of investigations.