Prosecutors look overseas for C& slush fund proof

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Prosecutors look overseas for C& slush fund proof

Prosecutors investigating the C& Group, a mid-size conglomerate, for alleged influence-peddling yesterday extended their probe into allegations that the group hid slush funds at affiliated overseas branches.

The prosecution was tipped that C& Heavy Industries had established container factories in Guangzhou, Dalian and Shanghai in China between 1992 and 1994 and that the slush funds were deposited in the related Chinese bank accounts.

The prosecutors plan to summon officials of the Chinese units to investigate how the money was spent. Prosecutors suspected that C& Heavy Industries had omitted China-related profits from its financial accounts. Money borrowed from Korean banks was also suspected of being diverted to overseas accounts, the prosecutors also said.

The conglomerate’s maritime shipping arm C& Line was accused of receiving 40 billion won ($35.8 million) through illegitimate transactions from its affiliates inside the group. The money was suspected of being diverted to its Singapore, Malaysia and Hong Kong branches.

Prosecutors believe that tracking the money flow will allow them to disclose the identities of politicians and government officials who might have been bribed by C& executives.

At the heart of the scandal are allegations that C& bribed government and banking officials during the two previous administrations to gain access to loans that helped fuel its rapid expansion.

Lim Byung-seok, 49, the C& chairman, has been held by the prosecution since Saturday. He accused of embezzling about 100 billion won to create the slush fund.

The prosecution also suspects the conglomerate received special treatment from the Financial Supervisory Service and Woori Bank when it sought 227.4 billion won in bank loans.

The prosecution believes that the corporate restructuring headquarters of C& Group, formed by Lim’s key aides, played a crucial role in raising the slush funds and using the money to buy influence.

Executives of the restructuring headquarters and Lim were questioned by the central investigation unit of the Supreme Public Prosecutors’ Office about the allegations and most of the C& executives were banned from leaving the country, sources said.

Lim has denied all the accusations linked to the influence-peddling scandal. As part of their investigation into C& Group’s suspicious loans from Woori Bank, the prosecution yesterday questioned a former Woori executive who was hired by C& Group as a senior official shortly after his retirement from the commercial bank. C& Group borrowed large sums from Woori Bank when Park Hae-choon was Woori’s CEO and his brother, Park Taek-chun, was head of C& Heavy Industries.

By Choe Sun-uk, Ser Myo-ja []
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