Whistle-blower accuses Taekwang of slush fund

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Whistle-blower accuses Taekwang of slush fund

Taekwang Group is being investigated for allegedly raising a slush fund to illegally lobby for changes in the broadcasting law that passed in 2008, which allowed Taekwang to buy a cable TV company, according to sources in the prosecutors’ office.

The Seoul Western District Prosecutors’ Office yesterday summoned Park Yun-bae, president of Seoul Investment Company, which is a minority shareholder of Taekwang.

Park alleged that Taekwang lobbied high-profile officials in 2006 to revise the broadcasting law, which didn’t allow the company to purchase cable TV company Qrix Communication Inc.

“I heard that Taekwang lobbied high-ranking officials to get the right to have more cable companies,” Park told the JoongAng Ilbo.

Park sent a report last month to the Seoul Western District Prosecutors’ Office that said the Taekwang chairman illegally acquired Qrix and had a slush fund. Prosecutors raided Taekwang headquarters Wednesday to seize documents and computer hard disks on the basis of Park’s report.

“It took a year and nine months for me to investigate the slush fund and lobbying suspicion,” Park said.

In 2006, Taekwang owned its own cable company, Tbroad, which had 2.6 million subscribers in 14 districts. Taekwang tried to merge with Qrix, which had 540,000 subscribers in six districts, but the law forbade such a merger to keep cable companies small.

Suspicion about Taekwang’s lobbying was raised when Qrix Holdings, the holding company of Qrix Communication Inc., sold 30 percent of its shares in 2006 to two companies, the Military Mutual Aid Association and Fine Partners Corporation.

Taekwang made a contract with the two companies to buy the shares after two years, promising to pay back the full price and 10 percent in compound interest.

After two years, the broadcasting law eased restrictions on ownership of cable TV companies, and Taekwang got control of Qrix with its 30 percent share. In 2009, Taekwang bought the remaining 70 percent for 260 billion won ($233 million).

Park said he analyzed documents from Taekwang and found that Lee Ho-jin, the company’s chairman, allegedly sold stocks of affiliated companies at low prices and gave them to his 16-year-old son. The proceeds from the stocks formed part of the alleged slush fund for lobbying government officials. Prosecutors also suspect that Lee sold shares on the stock market that he inherited, putting the proceeds in a bank account opened in another person’s name.

According to Park, the borrowed-name account is in Goryo Savings Bank and is worth about 400 billion won.

Prosecutors said, “We have a plan for investigating whether government officials were engaged in the scandal, but we do not have any definitive comments from them yet.”

The Seoul Central District Prosecutors’ Office investigated an alleged Taekwang slush fund and the Qrix merger last year but didn’t find conclusive evidence of wrongdoing. At the time, Taekwang was accused of providing sexual services for a former official of the Korea Communications Commission, who was seconded to the Blue House. The official resigned after rumors about him spread.

“I think I will be summoned [to the prosecution] a couple of times in the future, as there are many things that I have to prove in detail,” Park said.

By Choe Sun-uk, Kim Hee-jin [heejin@joongang.co.kr]
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