FTC says Cho’s relatives ran firms

Hanjin Group Chairman Cho Yang-ho has been recommended for prosecution by the Fair Trade Commission (FTC) for failing to report companies owned by his brother-in-law as affiliates for 15 years.

The FTC on Monday said Cho, who is also chairman of Korea’s leading airline, Korean Air, failed to report companies owned by the brother of his wife Lee Myung-hee as group affiliates between 2014 and 2017.

Cho failed to report three of the companies for much longer - since 2003 - but the statute of limitations for the crime is five years.

The four companies were identified as Taeil Trading, Taeil Catering, WAC International Logistics and Cheongwon Naengjang.

Some 60 to 100 percent of those companies were owned by Cho’s brother-in-law Lee Sang-jin or other relatives, including Lee’s wife and their children.

The companies supply Korean Air with food and beverages served on flights and also slippers and blankets.

Under the law, a conglomerate is required to report a company owned by a relative up to cousins twice removed as an affiliate when the conglomerate invests more than 30 percent.

Taeil Trade and Taeil Catering are said to be the largest suppliers to Korean Air.

As the companies were not listed as Hanjin Group affiliates, they were not subjected to regulations that limit work assigned to affiliates or regulatory obligations such as public notification of their earnings.

Identifying themselves as SMEs instead, they earned various benefits including tax breaks.

The FTC said Chairman Cho’s office had a list of companies run by 62 relatives, which it didn’t report. They were all managed by the group.

The FTC said it has asked Hanjin Group to turn in other documents to check if there were other affiliates owned by relatives and not reported to the government.

Hanjin Group, in a statement released on Monday, said it was all a mistake by an overwhelmed employee in charge of the issue.

“There were no reasons or intentions to hide it, but a mere administrative misunderstanding,” Hanjin Group said in the statement.

“Especially, some companies were independently managed by relatives, and thus made it difficult to know whether they should be reported as an affiliate.

“We plan on requesting a review by the FTC, and we will explain that the FTC’s action is extreme when compared to past precedents.”

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