Prosecutors said Monday that they are tracing stock trading records of CJ Group as part of its investigation into the conglomerate suspected of amassing illegal funds and evading taxes.
Investigators suspect that the food and entertainment giant may have used offshore slush funds and disguised itself as a foreign fund to repeatedly purchase and sell shares of its affiliates in recent years. The share values of CJ subsidiaries have been inflated during this process of alleged stock manipulation, allowing the group to reap a huge amount of profits, sources said.
The Seoul Central District Prosecutors’ Office is looking into transaction records of CJ Group and its subsidiary CJ Cheiljedang Corp. from 2004, 2007 and 2008.
The law enforcement authority said it would analyze the sales records to track down the source of funds and the real owner of the secret funds held in borrowed-name offshore bank accounts. They are zeroing in on CJ Group chairman Lee Jay-hyun on suspicions of raising slush funds to evade taxes and to purchase shares of CJ Group.
In the process of CJ Cheiljedang’s spin off from its parent company CJ Group in 2007, the chairman rapidly increased his share of CJ Group from 10 percent to 43.3 percent.
The prosecution is also looking into other suspicions that other family members ― Lee’s sister and vice chairwoman Lee Mie-kyung and younger brother Lee Jay-hwan ― have dodged taxes by transferring slush funds to their offshore accounts in Hong Kong and the British Virgin Islands, a well-known tax haven.
The family owners are suspected of amassing around 500 billion won in illicit funds, including 400 billion won kept in 400 borrowed-name bank accounts through fake trade transactions with its foreign affiliates believed to be paper companies, and other illegal business activities
Prosecutors said they will summon key figures including the family members of the group soon after they secure clear evidence.
The country’s 14th largest conglomerate is now facing a coordinated set of investigations by authorities.
The country’s financial watchdog has also begun a separate investigation into CJ’s alleged stock manipulation. The Financial Supervisory Service said it was looking into allegations of CJ Group manipulating stock price and using undisclosed insider information.
Running various businesses ranging from entertainment, bio-pharmacy to construction and the conglomerate has long been suspected of creating slush funds.
In 2008, the police revealed that the chairman had amassed large funds under borrowed names, resulting in him paying 170 billion won ($153 million) in taxes. However, the National Tax Service did not file criminal complaints against the company at the time.
The prosecution is currently looking into how much funds the chairman created under name-borrowed accounts and whether he paid 170 billion won in tax in 2008 from the secret fund the group created overseas.
By Cho Chung-un (
christory@heraldcorp.com)
