Prosecutors are zeroing in on family members of food and entertainment giant CJ Group, long suspected of operating a huge slush fund but never charged for lack of evidence.

The investigation is attracting particular attention as it could be just the start of a broader crackdown on conglomerate misdeeds in line with President Park Geun-hye’s pronounced war against tax evasion and the underground economy.

Investigators from the Seoul Central Prosecutors’ Office raided the Seoul Regional Tax Office on Wednesday to obtain data concerning tax audits on CJ Group conducted since 2008.

Police investigations conducted in 2008 revealed that the group had amassed large funds under borrowed names, resulting in CJ Group paying 170 billion won ($153 million) in taxes. However, the National Tax Service did not file criminal complaints against the company at the time.

On Tuesday, the prosecutors searched the headquarters and offices of the 14th largest business group and its affiliates, including food-maker CJ CheilJedang, CJ Management Research Institute and the residences of company executives.

In the prosecution’s search warrant, the group’s family members ― CJ chairman Lee Jay-hyun, vice chairwoman Lee Mie-kyung, and representative of CJ affiliates Lee Jay-hwan are reportedly described as the main culprits in the secret fund and tax evasion allegations.

The family owners are suspected of amassing around 500 billion won in illicit funds, including 400 billion won kept in 400 borrowed-name bank accounts through fake trade transactions with its foreign affiliates believed to be paper companies, and other illegal business activities.

Among the paper companies it established overseas are those in the British Virgin Islands, a British overseas territory and allegedly well-known tax haven for many Korean conglomerates including Samsung Engineering, SK, and Hanwha.

One CJ affiliate in the islands is EMVOY MEDIA PARTNERS (EMP), an entertainment firm of which the Korean conglomerate owns more than 90 percent of its holdings.

CJ Group explained Wednesday that the group took over the entertainment firm when merging with Megastar, a multiplex chain in Vietnam.

EMP is the holding company for the Vietnamese firm.

Another suspected money launderer of the conglomerate in the islands is WPWL, which is known as a construction firm.

“CJ Korea express (then Korea Express) participated in a waterway construction project in Libya in 1983 with Dong Ah Construction Industrial (a local construction firm). The logistics firm established local corporations with the Libyan government’s advice,” an official from the group said.

CJ Group took over Korea Express in 2012.

Meanwhile, the existence of the borrowed-name accounts was revealed in 2008 when a CJ finance team manger was indicted for a contract murder attempt.

He was said to have managed private funds kept in the borrowed-name accounts for chairman Lee.

The manager had allegedly misappropriated around 20 billion won from the secret funds to invest in real estate with his acquaintance who later refused to return the investment money and threatened the CJ official to reveal the source of the money.

The finance manager is accused of hiring a hit man to try to kill the blackmailer.

The Supreme Court upheld a lower court’s decision last year ruling that the CJ official was found not guilty.

The prosecution is expected to summon the official soon after completing the analysis of documents and relevant materials confiscated from the conglomerate during the raid Tuesday.

Running various businesses ranging from entertainment and bio-pharmacy to construction, the conglomerate has long been suspected of creating slush funds.

The family-owned group purchased 142 billion won worth of art from Gallery Seomi, a prominent art gallery, from 2001 to 2008 with money from an obscure source.

Gallery Seomi director Hong Song-won is now being investigated for her involvement in creating slush funds for business owners.

The prosecutorial investigation into CJ Group started recently after the Korea Financial Intelligence Unit, a state-run financial watchdog, referred the case to the prosecution.

The amount of money the KOFIU reported to the prosecution was 7 billion won but the actual amount could be more than that, according to prosecution officials.

“Since the investigation is in the early stages the amount of illicit funds could either increase or decrease. The prosecutors will conduct a thorough and extensive probe,” an official from the prosecutors’ office said.

By Kim Young-won (wone0102@heraldcorp.com)