By Bahk Eun-ji
The prosecution has formally arrested CJ Group Chairman Lee Jay-hyun on charges of embezzlement, tax evasion and breach of trust, Thursday.
Lee, 53, grandson of Lee Byung-chull, the founder of Samsung Group, is the first corporate executive to be indicted under the Park Geun-hye administration.
The Seoul Central District Prosecutors’ Office said Lee was indicted on three counts: raising 620 billion won of a slush fund, dodging some 55 billion won in taxes and misappropriating 96 billion won and causing 57 billion won in financial losses to the group in the process of buying two buildings in Tokyo.
"It’s significant that we’ve detected a conglomerate chairman’s massive tax evasion overseas for the first time," said Park Jeong-shik, a prosecutor in charge of the case at a press briefing.
CJ set up seven paper companies, including four abroad, to raise a slush fund and dodge taxes. It also organized a team in charge of managing private assets of the owning family under the chairman's office.
Shin Dong-ki, the vice president of CJ Global Holdings, was indicted on tax evasion charges and embezzlement and breach of duty for his role in aiding Lee’s crimes.
Three other former and current executives were also prosecuted as accomplices.
Prosecutors are also investigating stock price manipulation allegations.
Park said, “We will further investigate the allegation.”
Prosecutors will secure evidence of CJ's borrowed-name accounts in overseas banks and relevant documents to check if the group used slush fund money to buy high-priced artworks.
“We are going to investigate whether Lee used some artworks as tools to transfer his wealth to his children. At the same time, we secured some evidence that the group used secretly-raised funds to buy artworks overseas,” Park said.
However, Park said it has not confirmed the allegations that the group used slush fund money to illegally lobby government officials or politicians in return for business favors.
CJ is the nation’s 14th largest conglomerate and specializes in food and entertainment businesses. It was part of the Samsung Group until 1997.