Prosecutors summon CJ chief in slush fund probe

Prosecutors investigating CJ Group’s alleged illegal financial activities are to question its chief, Lee Jay-hyun, this week over his alleged tax evasion and stashing of slush funds.

The Seoul Central District Prosecutors’ Office announced Saturday that it had ordered him to appear for questioning on Tuesday.

Lee is suspected of being involved in creating slush funds and overseas tax evasion and holding additional assets held under borrowed names.

According to reports, the investigators believe that Lee stashed millions of dollars in secret funds by using fake deals on expensive art pieces. 

The prosecutors reportedly found evidence that dozens of the group’s executives had purchased up to 300 pieces of art since 2005. They are now looking into whether Lee used the names of the company’s executives in order to stash away funds and evade taxes.

The investigators are already questioning Hong Song-won, the head of Gallery Seomi, for assisting the CJ Group chairman in creating slush funds.

Lee and his family allegedly purchased a total of 138 pieces of artwork worth 142.2 billion won ($122 million) through the art gallery from 2001-2008. Hong is suspected of inflating the costs or forging papers in the purchase of artwork, though she denies the allegations.

Seoul investigators are said to be focusing on determining whether the group has illicit assets in addition to those revealed in 2008.

In 2008, the group paid 170 billion won in taxes for assets inherited from Samsung Group founder Lee Byung-chull that had been held under borrowed names.

Since raiding CJ Group’s headquarters on May 21, the investigators have been gathering data from concerned organizations including the Seoul tax office and the Korea Exchange to track down irregularities regarding CJ shares.

They believe the chairman of the country’s largest food company used assets hidden in overseas accounts to purchase shares of his companies to increase his stakes in CJ Group.

Prosecutors are also tracing the bank accounts related to CJ Group submitted by 54 Korean securities companies. CJ Group’s bank accounts at 13 savings banks are also subject to the probe.

The prosecution recently found that CJ chairman Lee sent some of the money he siphoned off to Swiss-based UBS Bank’s Hong Kong branch in setting up a company under a borrowed name to purchase real estate in Japan.

The prosecutors are considering requesting an arrest warrant against the Lee, depending on the results of Tuesday’s questioning.

By Oh Kyu-wook (596story@heraldcorp.com)