Trade Officials Launch JU Slush Probe

The Fair Trade Commission (FTC) was found on May 4 to have been investigating two multi-level marketing operators--JU Network and JU Phoenix--on suspicions of paying their marketers above the legal amount and illegal fundraising.

The prosecution, which has probed the JU Group for fraudulent behavior since last month, said it was looking into if the group had accumulated slush funds and opened a false-name bank account.

An official of the FTC said, “The FTC is looking into the two firms’ sales last year with 12 investigators from the FTC and the Seoul Metropolitan Government. The investigation will last until May 12.” He also said that the scale of the probe is the biggest of the probes the FTC has launched against multi-level marketing companies.

The FTC sees that if a multi-level firm pays its marketers more than 35% of its revenue, which is the legal payment cap, it is illegal activity.

The FTC will bring the firms before prosecutors if the suspicions prove true.

JU Network was fined about 9.4 billion won by the FTC for paying its marketers as much as 68.9% of its revenue on March 30 2006 for the third time, following 2003 and 2005.

The FTC reported on the result of the investigation into some of its own workers to the National Policy Committee on April 27. The workers had been accused of receiving bribes from JU Group.

Choi Jung-ho, head of the investigation team, said, “The Commission looked into its workers accused of receiving money from the group. But it didn’t find anything.”

An official of the Seoul Eastern District Prosecution’s Office, which is probing the case, said, “After comparing the cost prices and the delivery prices with the market prices of the group’s top 30 items, we found out some of their market prices are more than 10 times higher than their cost prices. That opens the possibility that the group had accumulated slush funds with the difference.”

The prosecution found out the supplier who almost exclusively had provided the group with certain items was one of the leaders of the group. It also found the group’s false-name account when looking into its accounting books.

The Grand National Party suggested the possibility that the scandal involves politicians, and called for an immediate investigation into the possibility after the National Intelligence Service announced JU Group had actively lobbied within political circles.