Eastar Jet's founder's nephew arrested for embezzlement
Lee Sang-jik, independent lawmaker and founder of Eastar Jet, speaks during a National Assembly session, Oct. 7. / Korea Times photo by Oh Dae-geun
By Jun Ji-hye
A nephew of the founder of cash-strapped Eastar Jet has been arrested on charges of embezzlement and breach of trust, according to district prosecutors in Jeonju, North Jeolla Province, Monday.
Eastar Jet's founder is independent lawmaker Lee Sang-jik, who left the ruling Democratic Party of Korea last Sept. 24, amid a mounting controversy over the company's massive layoffs.
The layoffs came after Jeju Air abandoned its acquisition of the debt-ridden budget carrier in July due mainly to growing uncertainties in the aviation industry caused by the prolonged COVID-19 pandemic.
Prosecutors arrested Lee's nephew, Jan. 18, for embezzling 10 billion won ($9 million) from company funds to buy stakes in Eastar Jet's holding company, Eastar Holdings.
Lee's daughter and son are controlling shareholders of Eastar Holdings, with the daughter assuming the CEO post.
The nephew was in charge of financial affairs of Eastar Jet and was also deeply involved in the work related to Eastar Jet's acquisition by Jeju Air until the bigger low-cost carrier decided to back out of its share purchase agreement signed with Eastar Holdings.
Prosecutors reportedly believe the nephew conspired with Lee to embezzle company funds. Following the nephew's arrest, investigators are expected to speed up their investigation into suspicions facing the lawmaker.
On Sept. 10, a committee of the main opposition People Power Party dedicated to unearth the truth behind the alleged corruption involving Eastar Jet's founding family members. They filed a complaint with the prosecution against Lee over allegations of embezzlement, breach of trust and violation of the Capital Markets Act.
“Eastar Jet announced it was laying off 605 of its 1,216 employees,” the committee said in a statement at the time. “After Jeju Air abandoned its acquisition, the Eastar Jet union sought self-rescue measures, but the management avoided responsibility, resulting in the current problem.”
For its part, the Eastar Jet union filed a complaint against Lee at the end of July, alleging tax evasion and spreading of false information.
In its complaint, the union said Lee had employed expedients to fund Eastar Holdings so the holding company could become the largest shareholder of the budget carrier. It speculated this could be in violation of the Inheritance Tax and Gift Tax Act.
When Jeju Air abandoned its acquisition, Eastar Jet's debts were estimated at about 170 billion won, including the company's delayed payments for fuel and the use of airport facilities as well as unpaid wages totaling about 24 billion won.