Prosecutors raided Hyosung Group and its chairman’s residence on Friday in a widening probe into the group and the owner family suspected of evading taxes for more than 15 years.

Hyosung chairman Cho Suck-rai and the group’s senior executives are suspected of fabricating accounting records to dodge tax and amass slush funds overseas.

Residences of the chairman’s three sons have also been raided, according to prosecutors at Seoul Central District Prosecutors’ Office.

Investigators have confiscated computer hard drives and documents, including accounting records, from the group’s head office in Seoul, to secure evidence of their wrongdoing.

Later in the afternoon, Hyosung denied accounting fraud, saying the group had simply been making up financial losses suffered during 1997 financial crisis.

”(We have) never used (the fund) for personal use (such as) creating slush funds or for embezzlement,“ the group said in a statement.

The raid came days after the National Tax Service had filed charges against chairman Cho and other senior executives with the prosecution for allegedly evading tens of billions won worth of tax through illegal business activities. The prosecution has been analyzing data submitted by the tax agency on Oct. 1.

Since May, the tax office has been conducting an inspection into the country’s 26th-largest conglomerate and accused the group of dodging corporate tax worth 1 trillion won since 1997 by manipulating accounting records.

The 79-year-old chairman is also suspected of keeping shares under borrowed names to evade taxes worth more than 100 billion, the agency said.

Cho and his key aides, including the group’s vice chairman Lee Sang-woon, have been banned from leaving the country during the tax agency’s probe.

The prosecution said it would probe other allegations that the group established paper firms in tax havens in the 1990s with money borrowed from local banks. The group is also suspected of gaining illegal profit by trading shares in the local stock market with a secret fund raised by the offshore paper companies.

The family-owned conglomerate operates businesses centering on energy and heavy industry and has more than 11 trillion won in assets. The Cho family is connected with former President Lee Myung-bak through a marriage between the chairman’s nephew and Lee’s daughter.

Cho’s eldest and youngest sons are reportedly locking horns to take a control over the group. They have been competing with each other to secure stakes in the group’s flagship Hyosung Corp., a textile and heavy machinery maker, according to sources.


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