Prosecution raids several CJ offices for tax evasionProsecutors raided CJ Group, the food and entertainment conglomerate, over suspicions it amassed a slush fund of millions of dollars overseas and used it to trade the company’s stock for its chairman.
The Seoul Central District Prosecutors’ Office headed by Senior Prosecutor Yoon Dae-jin said yesterday it raided CJ’s headquarters, CJ CheilJedang, the country’s top food maker, CJ Management Research Institute, all in Jung District in central Seoul, as well as residences of five or six officials of the group from 6:20 a.m.
Because the raid included the institute, the group’s think tank and the location of the office of CJ Chairman Lee Jay-hyun, speculation quickly arose that Lee was being targeted by the prosecution.
The institute is close to Lee’s house, and not many people at CJ know how many are employed there or what they do.
The prosecution sent about 60 officers including 10 investigators and dozens of digital forensic researchers and seized group accounts and computer hard drives.
Sources in the prosecution said a warrant issued by a local court stated that CJ was suspected of tax evasion. One of the officials whose house was raided is an executive-level finance officer.
The prosecution believes that CJ created a slush fund of about 7 billion won ($6.3 million) overseas.
It suspects the group funneled the money into a company established in Hong Kong in 2008 to serve as a shell company. That company allegedly purchased the group’s stock and sold the shares about a year later at a 30 to 40 percent profit.
“We don’t know exactly how big CJ’s slush fund was,” a spokesman for the prosecution told the JoongAng Ilbo. “We are focusing on Lee’s alleged tax evasion for now.”
The prosecution believes CJ created the slush fund through its overseas branches.
The branches created fake records to show sales of raw materials and goods to the company in Korea, and the mother company issued fake invoices for the transactions. There are about 140 foreign branches of CJ, and about 30 were established last year.
The prosecution said it started investigating after getting information from the Financial Intelligence Unit(FIU), which tracks tax evasion and hidden assets of taxpayers. The FIU first notified the prosecution in 2011 that they found CJ’s suspicious money flows.
“We will summon people as soon as we finish reviewing the evidence we secured,” a spokesman of the prosecution told reporters.
“When we arrived at the office this morning, officials from the prosecution was securing the premises, including the 13th floor where the financial management department is located,” an official at CJ Group told the JoongAng Ilbo.
“We don’t have any official stance on the case because the raid was a surprise. We will cooperate with the prosecution’s investigation.”
Legal circles think the Seoul Central District Prosecutors’ Office might expand its investigation into alleged tax evasion of Hong Song-won, head of Gallery Seomi, an art gallery in Cheongdam-dong, southern Seoul.
In February, the Seoul Central Prosecutors’ Office said the gallery was suspected of intentionally not issuing receipts and hiding revenues from selling art since 2007, evading about 3.5 billion won in taxes.
Allegedly, CJ Group purchased about 100 billion won worth of art through Hong, and the prosecution wants to know the source of that money.
By Chang Chung-hoon, Kwon Sang-soo [firstname.lastname@example.org]