Why did Kolon chief decide to retire so early?
Kolon Group Chairman Lee Woong-yeul announces his resignation at Kolon One&Only Tower in Magok-dong, Seoul, on Nov. 28. / Courtesy of Kolon Group
By Nam Hyun-woo
Suspicion is growing over the reason behind the “premature” resignation of Kolon Group Chairman Lee Woong-yeul as he is facing a criminal investigation over an alleged tax evasion.
Even though Kolon argues Lee's resignation has nothing to do with the prosecution's investigation, it is already dealing a heavy blow to the company's reputation, weighing down on share prices of group units.
According to Seoul Central District Prosecutors' Office Wednesday, prosecutors have recently started an investigation into allegations against Lee and plan to summon him for questioning.
The case was filed by the National Tax Service (NTS) last year, which raised questions about Lee's inheritance of a 40 percent stake in Kolon Corp., the group's holding company, from his late father and former chairman Lee Dong-chan, in 2015.
The tax agency launched an investigation on the holding company and flagship unit Kolon Industries in April 2016 and ordered them to pay 74.3 billion won in unpaid tax.
The group appealed the order to the Tax Tribunal and cut it to 12.56 billion won, but the NTS took the case to the prosecution due to a belief that Lee had intention to evade tax.
Over the prosecution's move, Kolon stressed Lee's resignation has no relation to the investigation, saying Lee “decided to quit the company a long time ago and the investigation came at an odd time.”
On Nov. 28, Lee abruptly announced he will withdraw from all of his posts within the group, including the group chairmanship, board membership and others at Kolon Corp. and Kolon Industries, effective Jan. 1.
In his letter, he explained he believes it was the last chance for him to muster the courage to quit and allow the group to embrace new leadership.
“Though we have pledged innovation in every New Year ceremony, no major changes have been made compared to 10 years ago,” Lee said. “This is the right time for me to leave. You (employees) also have to understand now is the time for change.”
He also said he will leave the country to start new businesses using the experiences as the group leader, but is expected to face setbacks when the prosecution's investigation picks up momentum.
Lee took chairmanship of Kolon in January 1996 and has led the group for 23 years. He owns 49.74 percent stake in the holding firm.
As the prosecution's move came to the public, Kolon stocks plunged throughout Wednesday's trading session.
Except for Kolon Life Science, a drug making unit, all Kolon stocks shed. Kolon Corp. ended at 34,100 won, down 3.94 percent from a day earlier, and Kolon Industries closed at 53,600 won, also down 1.83 percent during the same period.