Chaebol Scions Probed
By Kim Rahn
Staff Reporter
Prosecutors are investigating some family members of LG and other chaebol on suspicions that they reaped huge capital gains after spreading false rumors that they would take part in the management of some Kosdaq-listed firms.
They apprehended one of the suspects, Koo Bon-ho, the largest shareholder of Red Cap Tour and a cousin of LG Group Chairman Koo Bon-moo. Prosecutors sought an arrest warrant for him Friday.
A prosecutor at the Seoul Central Prosecutors' Office said the prosecution is investigating at least six people suspected of having engaged in insider trading and stock price manipulation on the Kosdaq. They are mostly second or third generation chaebol heirs.
Koo, 33, nicknamed ``the man with the Midas touch,'' allegedly reaped more than 200 billion won ($200 million) in stock investment gains between 2006 and 2007. But the prosecution believes that behind his spectacular performance were huge losses for retail investors who bought the stocks Koo held on the false belief that he would participate in the management of the companies listed on the Kosdaq.
Koo is also under a separate investigation involving lobbyist Cho Poong-eon, who allegedly bribed government officials to help prevent Daewoo Group from going bankrupt and to keep former Daewoo Chairman Kim Woo-choong out of jail.
The prosecution found that Red Cap Tour sold 200,000 shares to Glory Choice China, which Cho allegedly controlled, at 7,000 won per share in 2006. The price of the share jumped to 40,000 won, leading Glory Choice China to billions of won in gains.
Prosecutors also said that Koo and other chaebol scions ``colluded'' with insiders at Kosdaq-listed firms to inflate stock prices to the detriment of retail investors. Using inside information, they are suspected of having filed public notices on the exchange to give the false impression that they would participate in running the firms. Once retail investors rushed to invest in the stocks and stock prices surged, they took gains, leaving retail investors burned in their wake, prosecutors say.
``We are looking into whether they made false disclosure notes to inflate stock prices. Our probe is also focusing on allegations of insider trading in collusion with the executives of Kosdaq firms,'' a prosecutor said.
He said the investigation is aimed at sending the message that the prosecution is closely monitoring irregular stocks deals on the Kosdaq market.