Samsung chair probed over illegal accounts

The Financial Services Commission (FSC) announced its intention to find a way to levy fines on brokerage accounts registered under borrowed names and operated by Samsung patriarch Lee Kun-hee on Tuesday.

The decision concerns the 27 securities accounts held by Lee’s aides - mostly Samsung executives - that were created before the enactment of the real-name financial transaction system in 1993.

“We will launch an inspection into the bank and securities accounts under borrowed names in cooperation with related government bodies,” said Choi Jong-ku, chairman of the FSC.

But observers expect that the regulatory agency will find it hard to obtain the relevant financial records because financial institutions are required to store ledgers for only 10 years. Ledgers are books or computer files that record economic transactions.

The four institutions - Samsung Securities, Shinhan Investment, Mirae Asset Daewoo and Korea Investment & Securities - that opened the 27 accounts have said that they don’t have the necessary records as more than 10 years has passed.

The latest announcement represents a reversal of the regulator’s initial stance. Choi initially expressed skepticism over regulating accounts that were created before the real-name system was introduced.

“If we look at the rulings of related legal cases and authoritative interpretations, it would be difficult to fine Lee Kun-hee’s fake-name accounts,” he said in December.

The shift in stance came as the Ministry of Government Legislation raised the need on Monday to collect fines and taxes on accounts registered under borrowed names that were created before 1993.

The current law stipulates that a 90 percent income tax should be imposed on any “income from interests and dividends” accrued from financial assets that are not registered under the owner’s real name.

The original case harkens back to 2008, when a special investigation team revealed Lee had over 1,000 bogus bank and stock accounts that were structured to evade tax.

Rep. Park Yong-jin of the ruling Democratic Party brought the controversial accounts into the limelight last year, saying that authorities failed to fully level taxes and fines on the accounts that use fake names.

That prompted the police to launch another investigation, ultimately finding 260 new dubious accounts.

Lee was named as a suspect as of last week. The police has referred the case to the prosecution.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]