Workout companies go under tax audits

The Financial Supervisory Service (FSS) has commissioned the National Tax Service for a tax investigation of companies under the corporate workout program and their owners.

The companies include Mijoo; Jindo; Shinho and its affiliates such as Shinho Paper, Shinho Petrochemical and Tong Yang Steel; Shin Dong Bang; and Sohan.

Also, the FSS requested that the Fair Trade Commission make a close examination of Daewoo Motor, which is suspected of illegally acquiring securities of subcontractors under the names of other subcontractors.

The FSS announced August 22 that it had taken such measures after inspecting the moral hazards of the management and owners of 44 companies under the workout program. The inspection was made during July.

As a result of the investigation, it was found that Mijoo Group Chairman Park Sang-Hee sold his own real estate to Mijoo Corp., a subsidiary of the group, in December 1997 for 2.4 billion won and has received five payments for a total of 2.3 billion. Of the fund, he used 1.3 billion won for a capital increase for Mijoo Steel. Mijoo Corp. hasn`t paid the remaining 100 million won, so the land is still owned by Chairman Park. The sale price of the land that Park sold was 130,000 won higher per square meter than the appraised value of 200,000 won.

The FSS also reported that a person who is in special relationship with Jindo Group Chairman Kim Young-Jin sold his real estate to Jindo Construction at 8.6 billion won in June 1997, but it was sold at a rate as high as 211,000 won per square meter at a time when the appraised value was only 27,000 won. Jindo Construction specified that it had purchased the land for the construction of apartments but that it hasn`t gotten an approval yet for the apartment business. Chairman Kim has borrowed a total of 5.1 billion won from Jindo and used 2.2 billion won for personal purposes.

Shinho Group Chairman Lee Soon-Kook was found to have offered 3.4 billion won in promissory notes issued by Shinho Paper to the creditor bank for exemption of previous owner`s debt of 17 billion won in connection with the acquisition of Youngjin Tech in 1996.

In addition, the FSS requested tax investigations of Shin Dong Bang, Shinho Paper, Shinho Petrochemical, Dong Yang Steel Pipe and Seohan as they hardly can collect the money they have put into their insolvent subsidiaries.