By Kwon Mee-yoo
Taekwang Group, the nation’s 40th largest chaebol, is under investigation by the prosecution on suspicion of creating some 300 billion won ($270 million) in slush funds and illegally transferring stocks to the chairman’s child.
Seoul Seobu Prosecutors’ Office sent some 20 investigators to the conglomerate’s head office and its subsidiaries, Wednesday. The investigators seized accounting documents and computer discs from Taekwang Industrial, the flagship company specializing in petrochemicals.
The prosecution suspects Taekwang Chairman Lee Ho-jin, 48, of creating slush funds in false-name accounts. He is also accused of having illegally transferred stakes of major affiliates to his 16-year-old son who is currently studying in the United States, the same scheme previously used by Samsung Group to carry out a father-to-son transfer of group control.
In the same way that Samsung used an unlisted subsidiary as a vehicle for the power transfer, Taekwang, with 52 affiliates and total assets of 4.8 trillion won, also used stocks of unlisted firms to hand down group control to the heir.
Seoul Invest, a private equity fund representing minority shareholders of Taekwang, claimed that chairman Lee issued new stocks at a lower-than-market price to his son.
The younger Lee, a high school student, owns a 49 percent stake in each of the three unlisted affiliates of Taekwang. Seoul Invest claims that Chairman Lee sold the stocks of the affiliates at “dirt cheap” prices to his son.
The prosecution is examining the seized documents and plans to summon Chairman Lee and other executives, if necessary.
Taekwang did not announce any official statement in response to the prosecution’s raid.
The prosecution, which is investigating a number of executives and employees, said Thursday that it will also summon Chairman Lee and his family members if evidence of an illegal transfer of group control is discovered.
The raid on Taekwang is sending glaring red warning signals to other conglomerates.
The prosecution is also investigating Hanwha Group on suspicion of creating slush funds. Separately, Lotte Engineering and Construction was also audited by the National Tax Service amid suspicion of irregular deals with subcontractors.