Family that owned ferry probed from all directions

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Family that owned ferry probed from all directions


Prosecutors move items confiscated from a home owned by Yoo Byung-eun, considered the controller of Chonghaejin and its affiliates, in Daemyeong-dong, Daegu yesterday. The residence also provided the address for one of his shell companies. [JoongAng Ilbo]

What began as a probe into the ownership of the operator of the doomed Sewol ferry has turned into a corruption scandal after the family behind Chonghaejin Marine Company was accused of misappropriating company funds through irregularities such as accounting fraud.

Prosecutors are focusing on whether the management of the company can explain its safety procedures for the ferry.

Following raids on Wednesday, prosecutors revealed that patriarch Yoo Byung-eun and his two sons, who are in charge of running and overseeing the operator, allegedly registered their companies’ trademarks and charged royalty payments to Chonghaejin and subsidiaries for using the licensed names.

It is unusual for owners to charge monthly or annual royalty fees to their companies for use of trademarks or names. Investigators see the alleged practice as a stealthy way of siphoning off company funds.

Prosecutors obtained testimony that Chonghaejin Marine Company paid 100 million won ($96,600) in royalty fees last year to the second son of Yoo for use of the name “Sewol.”

Yoo Byung-eun is the head of the family and is considered master of Chonghaejin and its affiliates. But his two sons are registered as the majority owners of Chonghaejin and its holding company.

According to prosecutors, second son Hyeok-gi registered the trademark last year. The investigators said Yoo and his two sons have a total of 1,300 trademarks and amassed approximately 50 billion won over the past five years from the rights.

While the family allegedly raked in money from the trademarks, Chonghaejin itself posted 785.4 million won in losses last year, according to an audit by the National Tax Service and Financial Supervisory Service.

Because of its distressed finances, the operator is suspected of pursuing maximum profitability at the expense of passengers’ safety by overloading freight and redesigning the ferry to accommodate as many passengers as possible.

The shipping company also spent only 540,000 won last year to train its staff in safety measures.

In addition to the trademarks, prosecutors suspect that the elder Yoo used shell companies to manage slush funds.

Investigators from the Incheon District Prosecutors’ Office yesterday raided the offices of two shell companies and two subsidiaries. They said that the family owns at least three shell companies.

The two shell firms - Parrotbill, owned by the elder Yoo, and Key Solution by the second son - are alleged to manage slush funds and conduct illicit foreign trading. The shell companies are believed to have obtained some 20 billion won from the ferry operator’s affiliates for years.

In cooperation with the prosecutors’ office, financial watchdogs such as the Financial Supervisory Service and National Tax Service are jointly looking into allegations pertaining to financial irregularities.

Yoo and his family are estimated to own at least 240 billion won in assets, such as stock and real estate properties in foreign countries, including five mansions and luxury apartments in the United States.

Besides the establishment of shell companies, the 73-year-old Yoo, also the founder of Chonghaejin’s predecessor, Semo Group, is suspected of using other unconventional means to collect money, such as forcing affiliates to buy his photographs.

Under the artistic name of Ahae, Yoo held exhibitions of his own photographs in foreign countries, including Russia and Italy. Representative Kim Jae-won of the Saenuri Party raised an allegation that Chonghaejin spent 200 million won to buy Ahae’s photographs. The lawmaker said that when spending by all affiliates is added up, the amount paid for the photos will exceed 50 billion won.

The investigation into the family’s businesses and assets could be relevant to compensation for the families of victims of the April 16 ferry disaster.

So far, the government has used public funds to support the families of the dead or missing and to conduct rescue operations. However, it plans to charge expenses to the operator of the ferry by proving mismanagement.

In a widened investigation, the prosecution ordered the second son and a daughter to appear for questioning by today. They currently live abroad.

Yoo also serves as the leader of a pseudo-Christian cult, and prosecutors raided the office of the religious group on Wednesday. But 900 members of the cult staged a rally yesterday in front of broadcasting company KBS, saying the group has nothing to do with the ferry disaster. The members condemned KBS for biased reporting against the religious group.


Correction and rebuttal statement by the Evangelical Baptist Church

The Korea JoongAng Daily, regarding the reports since April 16, 2014, about the Evangelical Baptist Church (EBC) and Yoo Byung-eun, is publishing the following corrections and an excerpt from the rebuttal statement by the EBC.


Through three past investigations by the prosecution, it has been revealed that Yoo and the EBC, also known as the “Salvation Group” and Guwonpa in Korean, are not related to the Odaeyang mass suicide incident. That was also confirmed by the prosecution in its official statement on May 21. The prosecution’s investigation also found that Yoo had not made an attempt to smuggle himself out of the country or seek political asylum in France. We, therefore, correct the concerned reports.

Yoo retired from his executive management position in 1997. He did not own any shares in the noted companies, nor had he managed operations or used the operating funds for personal reasons. There are no grounds to call him the actual owner and chairman of the company. As such, he did not provide any directives in regards to the overloading of the Sewol ferry or its renovation.

It was verified that the captain and crew members who abandoned ship at the time of the Sewol ferry accident are not members of the EBC. It has also been verified that the EBC does not own any shares of Chonghaejin Marine Company and did not engage in its management.

Rebuttal statement

The EBC’s position is that the museums in the United States and Europe can never authorize an exhibition unless the artistic value of an artist’s works is recognized by the screening committee, irrespective of the amount of money an artist donates. The EBC’s position is that the exhibitions were not a result of Mr. Yoo’s patronage or donation, and Yoo also has not coerced Chonghaejin and its affiliates to purchase his photos.

The EBC states that Yoo did not participate in the foundation of the EBC in 1981, and the church does not offer him the title “pastor.” It also says a significant part of the 240 billion won ($206 million) worth of assets suspected of belonging to the Yoo family are real estate properties owned by the farming associations, which had been established by church members.

The EBC states that there are certain churches in Korea that call the EBC a cult, solely based on differences between their’s and the EBC’s doctrines.

But the EBC does not worship a particular individual as a religious sect leader or preach any doctrine that contradicts the Bible.

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