Tax authorities are investigating allegations of a slush fund creation by E-Mart, the discount store chain of Shinsegae Group.

According to reports, investigators at the Seoul Regional Tax Offices are probing whether a substantial portion of the company’s stock kept under an executive’s name actually belongs to Shinsegae chairwoman Lee Myung-hee, her son and Shinsegae vice chairman Chung Yong-jin and his younger sister Chung Yoo-kyung.

The investigators are also looking into whether the vice chairman has liquidated 6 billion won ($5.2 million) worth of shares to make up for the losses from the company’s overseas operations and affiliates.

“The investigation is being jointly conducted by the National Tax Service and the prosecution, based on a Financial Intelligence Unit report. We have spotted tens of billions of won kept in several borrowed-name bank accounts, and the value of the shares kept under borrowed names is also huge,” an investigator was quoted as saying to CBS.

If confirmed, the real owner of the company shares and funds will be charged with embezzlement, breach of conduct, tax evasion and other charges. Income and gift taxes as well as fines will also be levied.

The company admitted being probed by the tax authorities, but denied all allegations. “None of the staff have been questioned, and all claims are groundless,” an E-Mart spokesman said.

By Bae Ji-sook (baejisook@heraldcorp.com)