FTC to report Naver founder to prosecutors

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FTC to report Naver founder to prosecutors

Korea’s antitrust agency has decided to report Naver’s founder and global investment officer (GIO) Lee Hae-jin to prosecutors for failing to report its affiliates.

If found guilty, Lee could face a prison sentence of under two years or a maximum fine of 150 million won ($127,000).

The Fair Trade Commission (FTC) on Sunday said Lee failed to report 20 companies as affiliates of Naver in 2015.

Every year, conglomerates whose total assets exceed 5 trillion won are required to report their affiliates.

However, the FTC saw Naver’s GIO Lee intentionally falsifying the report before filing it to the antitrust agency.

The FTC said Lee was well aware of the affiliates considering that it included some that he owned a 100 percent stake of as well as some that were owned by his relatives. The agency said he also regularly received reports on the companies.

The affiliates that have been omitted include Jieum and Hwaeum. Jieum is a management consulting company that is solely owned by Lee. Hwaeum is a restaurant brand that Lee’s cousin owns a 50 percent stake in.

The FTC said Naver has also failed to report Line Friends, the IT giant’s global character brand, as an affiliate, despite it being solely own by Line, Naver’s Japanese subsidiary.

Another company that was omitted was YTN Plus, a digital news outlet that Naver has a 50 percent stake in.

The agency also said that 16 nonprofit companies that Naver has fully invested in were not reported.

The FTC only made a warning against the failure to report eight companies between 2017 and 2018 that were founded by an executive of the nonprofit software education company Connect, which is solely owned by Naver.

The FTC said that while the companies were indirectly owned by the executive, the eight companies have to be reported as Naver affiliates.

In early 2018, Lee stepped down from the company’s board, following a decision made in 2016 to resign from Naver’s board chairmanship.

It has been speculated that Lee has been trying to avoid being labeled by the government as Naver’s effective leader or owner.

Naver has repeatedly argued that Lee is not running the company and that Naver is run by professional management unlike other Korean conglomerates. The company says that Lee has not only stepped away from management but also only has a 3 percent stake in the company.

Yet, the FTC argues that Lee is actually the owner of Naver considering his influence in the company and that a majority of Naver stakeholders are those that have a less than 1 percent stake in the company.

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