The chairman of food and entertainment giant CJ Group was indicted Thursday for amassing massive slush funds in Korea and abroad, evading tax and embezzling company funds for personal use.

The Seoul Central District Prosecutors’ Office arrested Lee Jay-hyun on July 1 on charges of dodging some 54.6 billion won ($48 million) in taxes by creating secret funds under borrowed names at home and abroad.

The 53-year-old business tycoon is also accused of misappropriating 96.3 billion won of the group’s funds and inflicting 56.3 billion won worth of financial damage to the company by unlawfully buying two buildings in Tokyo.

Lee, a nephew of Samsung Electronics chairman Lee Kun-hee and the nation’s eighth-richest man, has been under investigation since May for allegedly hoarding secret funds at home and abroad using borrowed-name accounts, ghost companies and fraudulent accounting.

CJ offices were raided and key officials including the chairman were summoned by the prosecution for questioning.

After a two-month-long probe, Lee has become the first conglomerate chief to be indicted under Park Geun-hye’s government. President Park previously said she planned to introduce stricter penalties with jail sentences for chaebol owners for embezzlement or corruption. She reiterated that presidential pardons for business leaders would be limited as well.

“It is the first case of offshore tax evasion committed by a conglomerate chief,” said Park Jeong-sik, a senior prosecutor in charge of the case.

“We have taken stern action against the chaebol boss who took company assets as personal property, misappropriated company funds and evaded massive amounts of tax,” he said.

Wrapping up its investigation, the prosecution said the CJ Group was found to have stashed illegal funds worth 620 billion won in and out of the country since the late ’90s. The company, under Lee’s direction, established seven paper companies to illegally trade CJ shares and evade tax for substantial financial gains. To systematically dodge taxes and manage personal assets of the owner family, a secret team was even launched under the chairman’s office, prosecutors said.

Along with Lee, another three CJ executives accused of helping the chairman to amass the illegal funds were indicted. The list includes Shin Dong-ki, vice president of CJ Global Holdings, indicted on charges of tax evasion, company fund embezzlement and breach of duty. The prosecution has also put another executive staying in China on a wanted list.

The prosecution said it would investigated other allegations against Lee, including stock price manipulation. He is also suspected of hiding massive funds in overseas accounts and illegally purchasing shares of his companies by disguising himself as a foreign investor. Lee allegedly gained profits worth more than 5 billion won through the alleged stock manipulation, according to reports.

Investigators plan to secure borrowed-name accounts in overseas banks and relevant documents from a state financial regulator to prove Lee’s wrongdoings. They have also referred the case to National Tax Service to collect unpaid taxes from the indicted chairman and his accomplices.

CJ group issued an apology to the public for “causing concern.”

“We humbly accept the result of the prosecution’s investigation and will fulfill (our) duty (during the planned) trials,” the group said.


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