Hyosung Group Under Probe for Slush Funds

Hyosung Group, one of the nation’s biggest conglomerates, is under probe for allegedly amassing slush funds worth tens of billions of won through an overseas branch.

A former Hyosung employee reported to the Korea Independent Commission Against Corruption that around 2000, Hyosung Japan embezzled 20 billion to 30 billion won by inflating prices of ordered goods and using the excess money as slush funds.

The whistleblower reportedly provided detailed information on how Hyosung Japan accumulated the funds and secret ledgers.

Confirming the reliability of the informer through an investigation, the commission has officially asked prosecutors to probe the case.

Separately, the Financial Intelligence Unit under the Financial Services Commission also raised suspicion over the group’s illegal fundraising and notified prosecutors with materials supporting the allegation.

The unit’s role is to report suspicious capital inflows to law enforcement to prevent money laundering and illegal transfer of funds out of Korea.

Prosecutors say they will focus on the reliability of the allegation and will then expand the investigation into how Hyosung amassed the illegal funds and for what purposes.

In Feb. 2006, the group reported to the Financial Supervisory Service that it committed 152.5 billion won worth of accounting fraud. Hyosung is known to have confessed because the government at the time pledged lighter penalties for companies voluntarily admitting to accounting fraud.

needjung@donga.com wing@donga.com