Prosecutors have launched an investigation into one of South Korea’s top steelmakers, Dongkuk Steel Mill Co., over allegations of large-scale embezzlement and tax evasion.

The Seoul Central District Prosecutors’ Office on Saturday raided Dongkuk Steel’s headquarters in central Seoul, affiliate offices and the home of the company chairman, Chang Sae-joo, to seize the company’s account books, tax records and domestic and international transaction records.

The prosecution is also looking into allegations against Chang, including using illegally acquired funds to gamble in the U.S., according to local media reports Sunday.

Prosecutors have reportedly received U.S. intelligence reports that Chang spent roughly $2million to $3 million, taken from company funds, while gambling at high-end casinos in Las Vegas, pocketing roughly 5 billion won ($4.5 million).

Dongkuk Steel is alleged to have illegally stashed around 10 billion won in accounts held by its U.S. subsidiary Dongkuk International by recording exaggerated figures and later reporting partial deficits while purchasing raw materials from abroad.

Other subsidiaries of Dongkuk Steel, including facility maintenance firm Ferrum Infra Co., are being probed by the prosecution for creating slush funds in the process of carrying out transactions with its parent company.

The chairman has been convicted of corruption offenses in the past.

In 2004, Chang was sentenced to three years in prison, suspended for four years, for providing security loans to his relatives and paying off personal debts using company funds. The chairman later received a special pardon from President Lee Myung-bak.

In 2011, Chang underwent a special 8-month tax investigation by the National Tax Service, which ended with the chairman paying additional taxes without charges being pressed.

The recent investigation is considered to be part of a widening probe into the former Lee Myung-bak administration, including a series of inspections into overseas resource development projects carried out during Lee’s term in office.

On Friday, the prosecution began investigating former Chung-Ang University president Park Bum-hoon for allegedly granting special privileges to the university while working as a senior secretary to former president Lee from 2011 to 2013.

The same day, prosecutors raided the home of former POSCO Engineering & Construction vice chairman Chung Dong-hwa. Chung is suspected of having created slush funds worth over 10 billion won at the steelmaker’s construction operation in Vietnam.

Construction firm Keangnam Enterprises, state-run Korea National Oil Corp. and petrochemicals company SK Innovation are also facing similar charges of allegedly misusing government funds linked to the Lee administration’s state-financed projects.

By Sohn Ji-young (jys@heraldcorp.com)