Regulator launches CJ probe
By Kim Tae-jong
The Financial Supervisory Service (FSS) said Sunday it was investigating allegations that CJ Group manipulated its stock price using insider information.
Separately, state prosecutors were looking into CJ Group Chairman Lee Jay-hyun and his two siblings on suspected tax evasion through stock trading under “borrowed” names.
The financial watchdog believes that Lee reaped a huge windfall by manipulating stocks of CJ’s affiliates such as CJ Corp., CJ CheilJedang and CJ E&M.
He was suspected of using a slush fund hidden in offshore tax havens, such as the British Virgin Islands.
The financial regulator is also looking into how he used the inside information.
“The group chairman is suspected of manipulating stocks by pretending to be a foreign investor using a slush fund hidden in foreign countries,” an FSS official said. “We are also looking into the possibility that he was engaged in illegal stock trading using insider information.”
The FSS is closely looking at the public disclosure of stocks of CJ’s affiliates to see whether there have been dubious influxes of foreign capital into them, because Lee may have acted as if he was a foreign investor.
Under the current trading system, even Koreans are categorized as foreign investor, if they make an investment through a foreign affiliate. But a crime takes place when and if the investment is made for the purpose of manipulating stock prices.
Groups of stock manipulators here have abused the system by acting as foreign investors and taking out or moving in massive amounts of capital to boost the prices of certain stocks.
The proportion of stocks of CJ affiliates owned by foreigners stood at less than 20 percent in early 2007 but jumped to 24 percent in October and decreased to 22 percent at the end of that year. The current proportion stands at 20.68 percent.
The National Tax Service (NTS) has also launched probes into allegations of local firms’ tax evasion through offshore tax havens.
It is now examining documents regarding tax payments by Lee Soo-young, chairman of major chemical firm OCI, and his wife; the wife of former Korean Air Vice Chairman Cho Joong-geon; Cho Wook-rae, chairman of a real estate developer DSDL; and Cho’s eldest son.
The probe came days after the Korea Center for Investigative Journalism (KCIJ) disclosed the names of some of 245 Koreans it claims set up paper companies in the British Virgin Islands to dodge taxes.
The NTS plans to closely examine the tax payment documents and capital flow of firms and individuals in question.
“We will investigate those appearing on the list of KCIJ as well as those on our own list,” an NTS official said.