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Taekwang Probe to Summon 10 Figures for Questioning

Posted October. 21, 2010 11:20,   


Prosecutors decided Wednesday to summon around 10 current and former executives and staff of the Taekwang Group whose names were used in borrowed-named financial accounts.

This is part of an investigation into slush funds allegedly raised by the conglomerate. Those to be summoned include a former Taekwang Industrial employee who said the company managed slush funds through a borrowed-name account opened in his name.

To be subpoenaed as witness, the person said 1.9 billion won (1.7 million U.S. dollars) was deposited in an account under his name in 2007. He fought the company and eventually quit.

Prosecutors also questioned Lee Hyeong-cheol, chairman of a committee for the reinstatement of fired workers comprising unionized workers laid off by Heungkuk Life Insurance. Lee raised the suspicion that Taekwang Group Chairman Lee Ho-jin created slush funds worth tens of millions of dollars deposited in insurance accounts under the names of the insurer’s sales agents.

The committee also filed a complaint with prosecutors claiming dereliction of duty for Han Sang-ryul, former head of the National Tax Service. He is known to have levied a fine of just 79 billion won (70 million dollars) and failed to report the case to prosecutors even after discovering part of Lee’s slush funds in an audit of the group in 2007 and 2008.

Separately, the Fair Trade Commission is investigating whether payment of more than 50 billion won (44.2 million dollars) by Taekwang affiliates to purchase memberships at a golf course owned by the Lee family constitutes cross-subsidiary assistance, which is banned under law.

Heungkuk Life bought 10 memberships at Donglim Country Club, which is being built by Taekwang affiliate Donglim Tourism Development in Chuncheon, Gangwon Province, for 22 billion won (19 million dollars), or 2.2 billion won (1.9 million dollars) per membership.

Heungkuk Fire and Marine Insurance, which has incurred losses every year since 2005, also bought 12 memberships in August for 31.2 billion won (28 million dollars), or 2.6 billion won (2.3 million dollars) per membership.

pjw@donga.com hyejin@donga.com