Taekwang slush fund said to be a whopping 80B won

The prosecution’s investigation into Taekwang Group’s alleged slush fund entered a new stage as sacked labor union members of Heungkuk Life Insurance - an affiliated company under Taekwang - claimed in public comments yesterday that Taekwang Group chairman Lee Ho-jin raised at least 80 billion won ($71 million) for his slush fund insurance accounts, which were opened in other people’s names.

The insurance accounts are believed to be another part of alleged slush funds, in addition to a multibillion won bank account that prosecutors believe was used to illegally lobby for changes in the broadcasting law in 2008 - ultimately allowing Taekwang to take over cable TV company, Qrix.

Former Heungkuk Life Insurance labor union workers said when they engaged in a strike in 2003, they discovered documents and evidence that Taekwang Group chairman Lee and his family borrowed names of 115 insurance workers at Heungkuk Life Insurance and opened saving insurance accounts, keeping 31.3 billion won.

The former union workers said the accounts were set to expire between 1997 and 2000.

“The union also discovered 50 billion won in similar types of insurance accounts, which were to expire after 2001, but failed to obtain evidence because of Taekwang Group’s intervention,” said a former senior union worker who asked not to be named.

The union at the time asked the prosecution to investigate Lee on charges of misappropriating and embezzling company funds, but prosecutors wrapped up the investigation against Lee by filing a summary indictment and a fine of 5 million won.

The former union workers also accused Taekwang of illegally taking over Ssangyong Fire and Marine Insurance, which later merged with its affiliate, Huengkuk Life Insurance in 2006.

In January 2006, financial authorities approved Taekwang Group’s takeover of 54.4 percent of Sangyong Fire and Marine Insurance’s shares.

Taekwang’s affiliate - Heungkuk Life Insurance - took over the shares from Taekwang last year and it became the largest shareholder of Ssangyong.

Sources at the industry argued that Heungkuk Life Insurance allegedly bent laws and illegally purchased Ssangyong by using Taekwang to acquire shares of Ssangyong.

Heungkuk was unable to join the takeover bid of Ssangyong directly, because it was suspended in 2004 for three years to be qualified for the takeover on charges of granting 12.5 billion won of illegal loans to its major shareholder.

In a phone interview with JoongAng Ilbo, Lee Chang-bok, former chairman of Ssangyong Fire and Marine Insurance, said he felt a little odd about financial authorities who examined five companies (including Taekwang) that joined in bids to buy Ssangyong. He said authorities were lenient on Taekwang.

Lee served as Ssanyong chairman from 2004 to 2005 and was closely involved in the sale of the company.

“Though I don’t know the details of Taekwang Group’s alleged illegal takeover of Ssangyong, because financial authorities were in charge of approving Taekwang’s takeover, authorities pointed out minute and major problems of other companies including STX and a U.S.-based private equity fund company in a takeover bid, but they didn’t point out anything with Taekwang Group at that time,” Lee Chang-bok said.

“The authorities’ screening procedure to approve Taekwang’s takeover of Ssangyong Life was in great haste, too.”

Investigators at Seoul Western District Prosecutors’ Office said it will investigate Taekwang’s suspicious takeover of Ssangyong and it will also trace down financial transactions of Lee Ho-jin’s mother.

Taekwang Group said yesterday that it would cooperate with the prosecution’s investigation if there were “unintended” illegal activities.

By Kim Mi-ju, Choi Sun-uk [mijukim@joongang.co.kr]