Chairman Cho looks set to join troubled chaebol owner
By Kim Jae-won
The Hyosung Group tried to fight back an onslaught by prosecutors Friday afternoon but it appeared to be a half-baked bid that was not likely to 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 will cope with it remains to be seen.
Park has rarely appeared to be particularly kind to chaebol. Already SK leader Chey Tae-won is in jail and Lee Jay-hyun, chairman of CJ Group, and Hanwha Group Chairman Kim Seung-youn are furloughed for sickness.
Another chaebol head, who served as chairman of the Federation of Korean 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 a special audit into the group for months beginning in May.
Cho is further accused of holding shares worth more than 100 billion won under borrowed names since the 1990s to evade transfer and income 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.