|SM Entertainment CEO Lee Soo-man (Korea Herald file photo)|
According to news reports, the agency is suspected of having established “paper companies” in Hong Kong using famous artists’ names in order to avoid reporting the profits earned from performances overseas.
The Seoul tax authorities have now launched a formal investigation into the agency’s finances and reportedly sent a team of auditors to the SM headquarters in Gangnam-gu, southern Seoul, Tuesday. The officials were said to have shown up at the headquarters to collect the company’s accounting records and financial documents without prior notice in order to ensure that the entertainment agency did not “tamper” with the evidence.
A spokesperson from SM Entertainment released an official statement denying all accusations of misconduct on their end and claiming that the investigation was simply a “routine check-up” conducted every few years and was merely a follow-up inspection after a 2009 audit of the company. However, in the case of routine check-ups, the National Tax Service typically issues a 10-day notice prior to inquiries into a company’s finances.
SM Entertainment has long been one of Korea’s most profitable entertainment agencies, with CEO Lee Soo-man listed as the nation’s richest stockholder in the industry late last year, with stock worth an estimated 187 billion won ($174 million). The agency is home to some of the most popular K-pop acts including Girls’ Generation, TVXQ, Super Junior, SHINee and EXO.
By Julie Jackson (email@example.com)