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Money Laundering Probe Targets Hyundai

Posted April. 05, 2006 02:59,   


Prosecutors are investigating tip that Hyundai Automotive Group gained hundreds of billions of won in illegal profits by laundering slush fund money overseas and moving the money through fund investment companies to secure funding for the group’s power transfer to Kia Motors President Chung Eui-sun.

As the investigation progresses, the outcome not only can lead to legal punishment for Chung but also disrupt the group’s power transfer scheme.

The Supreme Pubic Prosecutors’ Office searched the offices of four investment companies yesterday, including Win & Win 21, Munhwa Investment, C&C Capital, and Q Capital Holdings, which are suspected of managing Hyundai Automotive Group slush fund money.

The prosecutors’ office arrested officials from those companies on charges of gaining illegal profits from managing Chung and the Hyundai Automotive Group slush funds.

Chae Dong-wook, the official responsible for investigation planning at the prosecutors’ office, said, “The seizure and search of those companies is related to the Hyundai Automotive Group’s slush fund.”

The prosecution believes that Chung formed a fund to secure money to acquire a stake in Kia Motors which serves as a lever in the cyclical investment structure of the Hyundai Automotive Group and gained hundreds of billions of won of profit by depositing the money into four investment companies. Chung currently owns a two percent stake in Kia Motors.

The group reportedly generated tens of billions of won of slush fund through its affiliates, including Glovis, and laundered the money through paper companies in tax havens in Southeast Asia.

The prosecution believes that the group took money into Korea and used it for creating a fund.

The prosecution also thinks that, while mainly investing the fund in stocks and bonds of Hyundai Motor affiliates, the four investment companies which managed the fund earned a large profit by obtaining undisclosed internal information of the group by conspiring with core officials of the general planning division of the group.

Most of the profit went to Chung, the owner of the fund who used and intended to use the money for buying shares needed for the power transfer, including Kia Motors shares.

The prosecution also said that the Hyundai Automotive Group had another figure related to the group participate in the fund as an investor to conceal such a structure.

The prosecutors’ office decided to request an arrest warrant against part of the four investment companies on charges of intervening in illegal management of a fund.

Regarding management of the fund, it also plans to summon and investigate Chung after wrapping up the probe into Hyundai Automotive Group’s financial executives.