Tong Yang Group chairman Hyun Jae-hyun once worked as a prosecutor and is still a registered attorney of Seoul Bar Association.

But amid recent woes at his conglomerate, the prosecutor-turned-businessman has been placed under investigation for alleged wrongdoing by the group that victimized a huge number of retail investors.

The prosecution launched its probe into Hyun on Tuesday a day after Citizens’ Coalition for Economic Justice filed a complaint against the Tong Yang chief over allegations of a financial scam and various ethical breaches.

The Financial Supervisory Service and the union of Tong Yang Securities also separately referred Hyun to the prosecution over similar allegations on Monday and Tuesday, respectively.

He is suspected of pressuring the group’s financial units to aggressively sell commercial paper and bonds, issued by the group’s debt-saddled manufacturing units, to individual customers without publicizing the risks of investment.

Hyun’s career as a businessman started in 1977 after he married Lee Hye-kyung, the eldest daughter of Tong Yang founder Lee Yang-gu and the group’s incumbent vice chairwoman.

Hyun, who was named chairman of Tong Yang Group in 1989, actively fostered financial businesses in the group that had been a manufacturing-oriented conglomerate.

The eldest son-in-law of founder Lee played a significant role in expanding Tong Yang as the nation’s 38th-largest conglomerate with 33 business units and average sales of about 9 trillion won ($8.2 billion) per annum, up from 600 billion won in 1989.

Hyun, however, failed to take preemptive measures against growing signs of insolvency at the group’s manufacturing subsidiaries.

Further, there are suspicions among market insiders that he sought to exploit six financial affiliates including Tong Yang Securities and Tong Yang Financial Services as illegitimate funding sources for ailing nonfinancial units.

The group’s five nonfinancial units filed for court receivership last week. About 46,000 retail investors, who invested CPs and bonds issued by the firms, are assumed to have suffered collective losses of an estimated 2.3 trillion won.

By Kim Yon-se (kys@heraldcorp.com)