CJ Chairman detained over slush fund allegations

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CJ Chairman detained over slush fund allegations

CJ Group Chairman Lee Jay-hyun who has been accused of running slush funds in tax havens, evading taxes and embezzling the conglomerate’s funds has been detained yesterday as a court accepted prosecutors’ request. Lee became the first chaebol chief detained under the Park Geun-hye administration.

The Seoul Central District Court issued a warrant to arrest Lee, chief of the country’s 14th largest conglomerate, around at 10 p.m., about eight hours after it had about a two and a half hours of hearing session in the court in Seocho-dong, southern Seoul. Lee was arrested at the Seoul Central District Prosecutors’ Office, where he was waiting for the court’s decision. He was sent to Seoul Detention Center on the southern outskirts of Seoul around at 10:55 p.m. and about 20 CJ officials watched him getting transferred anxiously.

"I sincerely apologize to the nation for everything," Lee said. “There is concern that he might flee or destroy evidence," senior judge Lee Woo-soo told reporters.

At 10:50 a.m., Lee appeared before the court to participate in a hearing held in the court. When about 100 reporters surrounded him and asked whether he admitted the charges but Lee remained silent. After letting the media take his picture in front of the court building, he said, “I will sincerely participate in the session,” and went into court room No. 319.

The prosecution believes that Lee has allegedly dodged 60 billion won to 70 billion won ($52 million to $60.6 million) in taxes by creating slush funds through shell companies established in the British Virgin Islands, including Chishan Development and Topridge, and also embezzled about 80 billion won of CJ CheilJedang money since 1998 by creating fake records of phony transactions between branches in Singapore and Hong Kong and the conglomerate headquarters in Korea.

Lee is also suspected of costing the company 35 billion won in losses by putting up a building that was owned by the company’s Japan office as collateral to borrow about 44 billion won from Shinhan Bank’s Tokyo branch to purchase two buildings in Tokyo’s Akasaka neighborhood.

Special investigation unit II of the central district prosecutors’ office sought a warrant to arrest Lee on Wednesday, about a month after they raided the group’s headquarters and affiliated companies and residences of some high-ranking officials of the group on May 21.

Source in the court told the JoongAng Ilbo that Lee’s defense counsel from the high-profile law firm Kim & Chang told the court it was unnecessary to detain Lee because there is no concern that he will flee or destroy evidence.

The prosecution wants to detain Lee for its investigation on an allegation that Lee has sent assets abroad. It believes that Lee has purchased about 300 works of art under the names of dozens of CJ employees since 2005 from Hong Song-won, head of Gallery Seomi in Cheongdam-dong, southern Seoul. Under the law, a person who sends abroad assets of more than 5 billion won is subject to life imprisonment or at least 10 years in prison.

BY SHIM SAE-ROM, KWON SANG-SOO [sakwon80@joongang.co.kr]
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