FTC reels over investigations

The Fair Trade Commission (FTC) is facing internal problems that could derail Chairman Kim Sang-jo’s plan to accelerate reform of the country’s conglomerates.

On Wednesday, the FTC’s headquarters was raided by the prosecutors’ office as part of an investigation into whether some FTC employees compromised an investigation into Booyoung Group.

During the prosecution’s arrest and indictment of Booyoung Group Chairman Lee Joong-keun in February on embezzlement charges, the FTC employees allegedly omitted some investigation findings from the report they submitted to the prosecution. Although the FTC reported five more additional Booyoung affiliates to the prosecution for falsely reporting the owners of several stock accounts for tax avoidance purposes, the prosecution believes FTC employees deliberately omitted the documents in their earlier report to lessen the punishment the Booyoung chairman would receive. The FTC’s later reports came after Lee’s arrest.

One of the departments raided was the business bureau created by Kim in September to specifically focus on potential violations from four leading Korean conglomerates - Samsung, Hyundai Motor, SK and LG.

On Wednesday, the prosecution also said it would investigate whether the FTC failed to report stock holdings of executives of big companies, such as Naver and Shinsegae, that were held under borrowed names.

Purposely omitting or falsely reporting actual stock ownership can be punished with a fine of up to 100 million won.

Around 10 current and former FTC officials are also under investigation for employment-related crimes, such as landing positions at companies they once investigated.

The public servant law prevents former government employees from being hired by companies or organizations if there is potential for a conflict of interest.

On Thursday, the FTC head said on a radio show that the antitrust body will take steps to reflect on its past mistakes, but hinted that the investigations stem from a misunderstanding.

“The FTC will inspect itself and reflect on whether there are areas that it has failed to win public trust,” Kim said.

The FTC chairman said the investigation is not aimed at its work over the past year but rather on documents transferred from the previous FTC leadership.

“However, because this is an ongoing investigation, I can’t go into details,” Kim said.

Civic groups like the People’s Solidarity for Participatory Democracy claimed that the FTC, unique among all major government institutions, failed to correct its past practices and penalize those responsible for them.

“Chairman Kim should no longer be manipulated by bureaucrats connected to conglomerates and retired pubic servants. He should end unfair cases and illegal job placements as soon as possible so that the investigation body can get a fresh start,” the civic group’s statement said.

Kim’s strong push to reform Korea’s conglomerates, particularly Samsung Group, has been thrown into question by the investigations of the FTC.

In his first-anniversary press briefing, Kim pressured conglomerates to quickly change their governance practices by selling off what he considers to be nonessential affiliates and unlisted companies used for chaebol family’s profit schemes.

“The controversy over [conglomerates] pushing work [to affiliates] stems from conglomerates controlling families owning stakes in nonessential and unlisted affiliates,” Kim said earlier this month. “The practice of conglomerates giving work to affiliates … destroys the businesses of small and medium-sized companies and small merchants.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]