C& raided over alleged slush fund

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C& raided over alleged slush fund

The Supreme Public Prosecutors’ Office yesterday arrested the chairman of C& Group, Lim Byung-seok, and raided the headquarters and affiliates of the mid-size conglomerate as part of an investigation into slush fund allegations.

Investigators and prosecutors from the central investigation unit - an elite group inside the Supreme Public Prosecutors’ Office - were sent to the headquarters of C& Group in Janggyo-dong, Seoul, and its construction arm C& Woobang in Daegu yesterday morning. Computers and financial records were confiscated from offices of top executives and their secretaries.

Lim, 49, was arrested at his house, and the prosecution is seeking a warrant to detain him longer to question him about allegations that he had embezzled a large amount of the company’s money and raised slush funds to buy favors from politicians and government and financial officials.

Yesterday’s move by the central investigation unit indicated that the elite investigators in charge of high-profile cases were back in business after their operations were halted in light of last year’s massive influence-peddling scandal around Busan-based shoe magnate Park Yeon-cha, which implicated the family of former President Roh Moo-hyun.

Founded in 1990 as Chilsan Shipping, C& Group rapidly expanded during the Roh administration through hostile takeovers of companies in trouble after the 1997 Asian financial crisis. Over two decades, the conglomerate grew to have 41 affiliates, including maritime, shipping, construction, fashion and leisure companies. By late 2006, C& Group’s sales reached more than 2 trillion won ($1.8 billion), and it ranked as the 71st largest business group in Korea in 2007.

The conglomerate has recently been plagued by financial problems. Its key affiliates, C& Heavy Industries and C& Woobang, filed for debt restructuring in 2008 to avoid bankruptcy.

According to prosecution sources, the probe into C& Group was launched after suspicions grew about irregularities during its period of rapid expansion. A large amount of slush funds was allegedly raised during the takeovers, sources said.

It is not the first time that C& Group has become a target of criminal investigation. Lim, the founder of the group, was investigated by the prosecution in 2004 on charges of giving bribes to politicians and government officials during the takeover of the construction company Woobang. At the time, Woobang was under court receivership, and Lim was accused of paying bribes to Kim Jae-rok, an influence-peddler, in return for banks’ favors in loans to buy the company. No charges were filed against Lim at the time.

The prosecution said it has obtained tips that C& Group had received favorable treatment from financial authorities in 2006 in the midst of additional takeovers. The Financial Supervisory Service investigated but took no action, sources at the prosecution said.

The investigation of C& Group confirmed that the central investigation unit had resumed its operations. After wrapping up the Park Yeon-cha scandal in June 2009, the team halted its operations following former President Roh’s suicide. Roh was questioned by the team on April 20, 2009, and killed himself on May 23.

The resumption of high-profile investigations has been expected after Prosecutor General Kim Joon-gyu said they were always paying attention to slush fund allegations.

Appearing before the National Assembly’s Legislative and Judiciary Committee on Monday, Kim said, “The central investigation unit has been on reserve for more than a year, but it’s just a matter of time for them to get back to business.”

Insiders in the prosecution said yesterday that investigations into two or three more conglomerates among the country’s top 10 are to come in the months ahead. “The investigation into C& Group is only a warm-up before the real games begin,” a prosecution source said.


By Ser Myo-ja, Jeon Jin-bae [myoja@joongang.co.kr]

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