[THE INVESTOR] Beauty and pharmaceutical company Kolmar Korea is under investigation by tax authorities in what appears to be a targeted probe into the controlling family.

Dozens of employees of the National Tax Service raided the firm‘s headquarters on June 9, seizing financial records.

The NTS investigation comes a year before Kolmar Korea’s scheduled regular tax audit. 


Industry watchers say the sudden investigation is closely linked to allegations that CEO Yoon Dong-han misappropriated the holding structure of Kolmar Korea Group to increase the value of his children’s shares in the company.

According to its financial disclosures, Yoon currently holds 40.3 percent of Kolmar Korea Holdings, which controls four subsidiaries. His son, Yoon Sang-hyun, holds another 8.7 percent.

One of Kolmar Korea Holding‘s subsidiaries, Kolmar BNH, holds a 45 percent stake of another subsidiary called HnG. Yoon Sang-hyun holds 15.6 percent and his daughter Yoon Yeo-won 39.4 percent of HnG, effectively placing the entire company under the founding family’s control.

HnG specializes in manufacturing cosmetics and distributing pharmaceuticals. Its revenue grew quickly from 54.5 billion won ($46.9 million) in 2013 to 78.5 billion won in 2014 and 120.3 billion won last year, largely due to its contracts with other companies under the Kolmar Korea umbrella.

The disclosure data shows that approximately one-third of HnG‘s revenue comes from transactions with other affiliates. Kolmar Korea supplies pharmaceutical products to HnG, which critics say is an unnecessary transaction designed to create revenue from within the group and balloon the value of the Yoon family’s holdings.

However, Kolmar Korea argues that its relationship with HnG is a legitimate and necessary part of distributing Kolmar‘s products to consumers.


Since Kolmar Korea itself is not a licensed distributor, it relies on external distributors such as HnG, the company has been quoted as saying in news reports. A spokesman for Kolmar could not be reached by The Korea Herald as of print time.

Fair trade regulations dictate that companies worth more than 5 trillion won can be charged with unfair internal collaboration if the owning family controls over 30 percent of the affiliate and internal transactions make up more than 12 percent of revenues.

Despite the high revenues acquired by HnG through Kolmar Korea Group, the company cannot be charged as its value has not yet reached 5 trillion won.

Some watchers speculate that the investigation may also be looking into the transactions between the Kolmar Group and contract sales organizations, which have recently come under scrutiny for possible use of kickbacks.

By Won Ho-jung (hjwon@heraldcorp.com)