The unprecedented intensity of the recent prosecutorial raids of
Lotte Group, the nation’s largest retail giant and fifth-largest conglomerate, has created anxiety in local industrial circles that any company could become the next target.
Several reputed corporations of various size and sector have already come under investigation in recent years and their common element, according to industrial and political observers, is their close relationship with the former President Lee Myung-bak administration.
The most eye-catching example was that of top steelmaker
POSCO, involving not only a high-ranking ruling party lawmaker, but also the elder brother of the former president.
In March last year, the Seoul Central District Prosecutor’s Office indicted Lee Byung-seok, then-lawmaker of the ruling conservative Saenuri Party in Pohang, on charges of forcing the steelmaker into business transactions with his close aides in 2009.
The business deals, worth some 890 million won ($764,000) in profits, purportedly came in exchange for a political favor. Upon the request of then-POSCO chairman Chung Joon-yang, Lee had used his influence as fourth-term lawmaker and chairman of the parliamentary land and transport committee to lift a legal construction height limit, according to prosecutors.
POSCO was at the time attempting to expand its manufacturing facilities, but its plan was being thwarted due to regulations on building heights within the vicinity of the nearby Navy unit.
During the probe, authorities also made charges against chairman Chung and Lee Sang-deuk, elder brother of the former president, the latter on allegations of influence-peddling to help Chung take the chairmanship in 2009.
By addressing the elder Lee, the prosecution publicly acknowledged the years-long rumors that the president’s brother was involved in a number of irregularities.
But despite the ambitious gesture, the POSCO case ended in an anticlimax in February this year as most of the key officials, including lawmaker Lee and presidential brother Lee, were arraigned in court without physical detention. Their court hearings are still pending in the Seoul Central District Court.
Food and entertainment giant
CJ Group and its chief
Lee Jay-hyun, on the other hand, faced harsher consequences.
The nation’s 14th-largest conglomerate achieved substantial growth during the former Lee administration, expanding its total assets 2.2-fold, from 10.2 trillion won in 2008 to 22.9 trillion won in 2012.
Not only did it enlarge its broadcasting and food businesses, it also took over freight forwarding market champion Korea Express in 2011, extending its horizons onto the distribution sector as well. It was especially the group’s food affiliate CJ Cheil Jedang that benefited from the former administration’s aspiration to globalize Korean food culture.
Backed by such leaps, then-chairman Lee unveiled in 2010 the “Great CJ” vision, a long-term blueprint aiming to pull up the group’s sales up to 100 trillion won and its operating profits to 10 trillion won by year 2020.
The ambition, however, was thwarted when Lee faced arrest on charges of embezzlement in July 2013, only five months from the inauguration of the incumbent President Park Geun-hye.
After lengthy court trials, he was handed a 30-month jail sentence in December last year by the Seoul High Court, upon which CJ Group made a final appeal to the Supreme Court.
The actual prison sentence took industrial circles by surprise, as other chaebol chiefs facing similar embezzlement charges -- such as Hanwha Group’s Kim Seung-youn -- had received suspended terms.
With the sudden leadership vacuum and the consequent impact upon its mergers and acquisitions strategies, CJ Group’s investment size fell short of 2 trillion won last year, dipping from a former 3 trillion won in 2012.
Hyosung Group, specializing in chemicals and known for its in-law relationship with former President Lee, also received prosecutorial blows under the current administration.
Chairman Cho Suck-rai was dealt a three-year jail term and a fine of 136.5 billion won in January on charges of tax evasion and embezzlement of some 800 billion won. He was also accused of evading taxes for 1.9 billion won worth of bonds with warrant, using borrowed-name accounts, according to the Financial Supervisory Service in May.
Cho Hyun-beom, CEO of Hankook Tire and nephew of the Hyosung chairman, married Lee’s third daughter in 2001, connecting the chaebol chief and the president-to-be as in-laws.
By Bae Hyun-jung (
tellme@heraldcorp.com)