CJ probe drags in ex-tax chiefs

Prosecutors who have been investigating corruption allegations surrounding jailed CJ Group Chairman Lee Jay-hyun are expanding their probe to target former high-ranking government officials. They suspect that members of the Lee Myung-bak administration helped CJ avoid tax investigations in return for cash and luxury watches.

Lee, the chief of the country’s 14th-largest conglomerate, was indicted and detained on July 18 for allegedly creating slush funds worth a total of 620 billion won ($440.5 million), evading taxes and embezzling company funds to the tune of around 200 billion won.

The Seoul Central Prosecutors’ Office, which is in charge of the case, said on Sunday that CJ gave hundreds of millions of won to the former chief of the National Tax Service, Jun Gun-pyo. The intelligence came from Heo Byung-yik, the former deputy head of the tax agency, who was detained on Saturday for taking bribes from the conglomerate.

“I handed $300,000 over to Jun that I had received from CJ Global Holdings’ vice chairman Shin Dong-ki,” prosecutors quoted Heo as saying during questioning. Shin, a close aide to Lee, is known as the person who managed the boss’ personal assets.

At the time, CJ was the subject of a tax investigation.

Prosecutors said that after the money was delivered, the four - Lee, Shin, and the two tax agency officials - met in a hotel restaurant in Seoul in 2006. There, prosecutors say, the two tax officers received luxury watches - Jun a Cartier and Heo a Frank Muller. Heo denied the allegation.

Heo had voluntarily appeared at the prosecution’s office to plead his innocence, but was arrested. An immediate request by prosecutors to detain him for further questioning was granted by the Seoul Central District Court. “Because this is a very serious case, it is necessary to detain Heo for further investigation,” said Judge Um Sang-pil of the central district court.

Prosecutors suspect that Lee might have also bribed other high-level officials during the last administration using his personal network. Heo, Lee and Shin are all alumni of Korea University. Heo and Jun are both from Gangwon.

Other high-ranking officials could also get caught up in the probe. In 2008, the central investigation unit of the Supreme Prosecutors’ Office obtained documents that showed CJ evaded a total of 170 billion won in taxes when they raided the NTS as part of the so-called “Park Yeon-cha Gate.” But CJ avoided a probe at the time as the evidence wasn’t related to the case at hand. Park Yeon-cha Gate is a high-profile bribery scandal that sparked an investigation into the late President Roh Moo-hyun and his family.

Prosecutors say Heo also helped CJ in 2009, when he was the acting tax agency commissioner and the group was being investigated. “One day, Heo informed me that the tax agency will investigate the chairman’s secret personal assets,” Shin said during questioning, according to prosecutors.

In 2008 and 2009, the tax agency found that Lee had created about 400 billion won in slush funds. Lee claimed he had inherited the money from his parents. The tax service at the time said it believed him and didn’t request a prosecutor investigation. Having avoided that probe, CJ later voluntarily paid 170 million won in inheritance tax.

In addition, a close Lee Myung-bak aide has been named by the CJ chairman. Lee told prosecutors he gave hundreds of millions of won to the official, who later became a vice minister.

But prosecutors say they can’t go after the aide because of the five-year statute of limitations that applies to people who violate the country’s political funding law. The former aide went to Korea University with Lee Jay-hyun, and the two have remained close.

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