Prosecutors are expanding their investigation into food and entertainment giant CJ Group to include additional suspicions of massive income tax evasion and illegal wealth transfer to chairman’s children.

The country’s 14th largest conglomerate has been under probe on allegations of creating a huge slush fund overseas and bringing the illicit money into the country.

Prosecutors imposed Thursday an overseas travel ban on the family owners of the group including CJ chairman Lee Jay-hyun, vice chairwoman Lee Mie-kyung, and representative of CJ affiliates Lee Jay-hwan. The list also included six executives allegedly involved in a series of illegal business activities.

Investigators have reportedly obtained circumstantial evidence of CJ evading capital gain tax, even though it took profits by trading shares in the group with illicit funds. It is believed that CJ Group allegedly established paper companies in the British Virgin Islands, a well-known tax haven, to dodge taxes and to operate slush funds.

They are also looking into another allegation that the chairman transferred the massive slush fund to his two children.

The conglomerate is also suspected of gaining profits worth 30 billion won by selling a part of land on which the group planned to build a logistic complex in Hwaseong, Gyeonggi Province through an overseas project financing company. In the process of the land transaction, CJ allegedly used part of the slush fund the company created overseas.

The prosecution plans to summon CJ family members as soon as it concludes analyzing documents confiscated from the group.

“We will summon key figures involved in this case after concluding an analysis of the secured files and documents,” a prosecutor from the Seoul Central District Prosecutors’ Office said.

Investigators from the Seoul Central Prosecutors’ Office raided the Seoul Regional Tax Office on Wednesday to get tax audit files on CJ Group for the last few years.

In 2008, the police revealed that the chairman had amassed large funds under borrowed names, resulting in him paying 170 billion won ($153 million) in taxes. However, the National Tax Service did not file criminal complaints against the company at the time.

The prosecution is currently looking into how much funds the chairman created under name-borrowed accounts and whether he paid 170 billion won in tax in 2008 from the secret fund the group created overseas.

On Tuesday, the prosecution also 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.

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.


By Cho Chung-un
(christory@heraldcorp.com)