Busan prosecutors quiz Shin in soju factory case

Shin Joon-ho

BUSAN - Prosecutors from the Busan District Prosecutors’ Office yesterday summoned and questioned Shin Joon-ho, the chairman of local milk manufacturer Purmil, in an investigation into allegations that he illegally manipulated accounting documents of Busan-based soju company Daesun and sold it to a private equity fund at an inflated price.

According to prosecutors, Shin, a younger brother of Lotte Group Chairman Shin Kyuk-ho, acquired his in-law’s bankrupt local soju company for 60 billion won ($53.2 million) in 2004. He sold it for 360 billion won, six times the original price, three years later to Cornerstone Equity Partners. Shin didn’t retain all the profits from the sale. He invested 20 billion won in Cornerstone and still has managerial rights.

To protect his in-law’s company from being merged with the liquor manufacturer Muhak, Shin injected the 60 billion won and successfully acquired 98.97 percent of Daesun’s shares in the names of five people, including his only son, his daughter-in-law and his grandson.

When Cornerstone acquired Daesun, it borrowed 200 billion won from banks. Prosecutors said Shin told the banks that he would put Daesun’s property up as collateral to help the private equity company’s acquisition.

Prosecutors say Shin’s action was a leveraged buyout, meaning he acquired a controlling interest in the company with money borrowed using the Daesun’s property as collateral. Shin said he agreed to put Daesun’s property up as collateral to banks but denied it was a leverage buyout.

“I’m certain that there are no ethical and legal problems when I sold the company,” Shin told reporters when he appeared for questioning yesterday morning.

By Kim Sang-jin, Kim Mi-ju [mijukim@joongang.co.kr]