CJ chairman may face arrest
CJ Group Chairman Lee Jay-hyun
By Kim Jae-won
The prosecution may seek an arrest for CJ Group Chairman Lee Jay-hyun on charges of tax evasion, stock manipulation and breach of trust, a senior prosecutor said Friday.
The Seoul Central District Prosecutors’ Office (SCDPO) wants to take the 53-year-old businessman into custody for questioning about his role in dodging tens of billions of won of income tax, manipulating stocks of CJ’s affiliates and damaging the group’s interest by helping his siblings, the prosecutor said.
Investigators suspect Lee did not pay at least 10 billion won of income tax while trading stocks of affiliates, such as CJ Corp., CJ CheilJedang and CJ E&M, using “borrowed” names.
CJ Corp. is the group’s holding company, while CJ CheilJedang and CJ E&M are its flagship food and entertainment firms.
Lee is suspected of manipulating those stock prices using slush funds hidden in foreign banks based in Switzerland, Singapore and Hong Kong. As the funds are from foreign countries, they were taken to be foreign investors, which helped boost the stock prices of the companies.
In Korea, foreign investors’ stock purchases are seen as a “buy signal” for local investors, and their trade patterns affect the market greatly.
In terms of the breach of trust allegation, investigators are looking into why CJ Corp. bought CJ America’s financially-weak affiliate, which Lee’s sister Lee Mi-kyung owned, damaging the company’s value. Chairman Lee is the major shareholder of CJ Corp., the holding company of the group.
Lee may face up to 11 years in prison if the allegations are true. According to the related laws, those who take more than 30 billion won in illegal gains from stock manipulation are subject to up to 11 years jail term. Charges of breach of trust and tax evasion vary from four to 11 years in prison according to the amount of money.
Investigators have obtained credible evidence, including testimony from a former executive who handled the company’s finances, that Lee hid as much as 350 billion won in more than 300 different bank accounts in Hong Kong, according to prosecution sources.
They suspect CJ also established special purpose companies in the British Virgin Islands, a well-known tax haven, to evade taxes and create slush funds.
Prosecutors are also expanding their probe into allegations Lee transferred part of a secret fund worth 50 billion won to his two offspring, without paying gift taxes.