Korean Air family under siege despite father’s apology

The controlling family of the nation’s largest air carrier found itself under heavy criticism Monday, amid the emergence of fresh allegations of misconduct and another search and seizure operation -- this time at its headquarters -- despite a public apology made by the father of the two troubled heiresses a day earlier.

Customs investigators raided the head and branch offices of Korean Air in Seoul where the air carrier’s Senior Vice President Cho Hyun-min has offices, to secure evidence of customs evasion.

Cho, also known as Emily Cho, is the youngest daughter of Korean Air Chairman Cho Yang-ho. She has been at the center of controversy after she was accused of throwing water at an advertising agency official during a meeting, sparking a flurry of accusations that the family members had abused their authority over staff.

The customs service agency was raiding Korean Air offices for a second time. Last week, the agency confiscated evidence from residences of the ownership family members and tracked down their credit card transaction records.

Monday’s raid appears to have focused on suspicions the family regularly smuggled luxury items by disguising them as airplane parts and office supplies. The alleged evasions of customs checks had been carried out by Korean Air staff acting under the family’s orders over many years, according to anonymous sources inside the company.

Police also plan to summon Cho Hyun-min within the week to question her under suspicion of assault, and open a preliminary probe into her mother, Lee Myung-hee, over allegations she assaulted and verbally abused workers when renovating her house in 2013.

As the whistleblowing and “expose” reports continue to pour out from anonymous sources and news outlets, one media outlet has reported suspicions of the airline using a liquid containing cancer-causing agents to remove stains on passenger seats and carpets.

Amid escalating controversy, the air carrier said it has named a former Constitutional Court judge to chair its planned compliance committee.

In the Sunday letter of apology, Chairman Cho pledged to strengthen the role of the boardroom and launch a compliance committee to “institutionally prevent” such incidents from happening, while firing his two daughters.

Along with Cho Hyun-min, Cho Hyun-ah, president of KAL Hotel Network, an affiliate of the carrier, was forced to step down.

In 2014, Cho Hyun-ah, also known as Heather Cho, was jailed for five months for ordering a Korean Air plane to return to its gate at a New York airport after she was angered over the way a pack of macadamia nuts was served to her in first class.

The share price of Korean Air, despite gaining 2.7 percent Monday afternoon, has lost about 5 percent since April 12, when the “water rage” scandal first flared up.

Some analysts said that Korean Air’s ownership risk will have a limited impact to the air carrier’s stock price, as the company has enjoyed a boom in the cargo industry and growing demand for outbound travel. The company also plans to expand its Asia-Pacific routes in a joint venture with Delta Airlines by the end of this year.

Bruce Lee, founder and chairman of Zebra Investment in Seoul, however, urged major stakeholders like the National Pension Service to raise their voices to hold Chairman Cho and his family in check.

“Korean Air may suffer a limited impact because of its monopolistic presence” in the local aviation market, he said.

“The incident represents a typical problem within chaebol governance structures. If the family is found guilty of violating the regulations, major shareholders like NPS should step up and strengthen monitoring of their management,” he said.

The NPS holds 12.6 percent while foreign investors hold 17 percent stake in Korean Air, which is valued at 3.1 trillion won ($2.9 billion).

By Cho Chung-un (christory@heraldcorp.com)