State prosecutors said on Wednesday they had found enough circumstantial evidence to accuse SK Group chairman Chey Tae-won of embezzling at least 99.2 billion won ($88.8 million) in company funds to make up for the losses from his investment in futures.

The prosecution is looking into materials confiscated from its raid a day earlier on five SK affiliates ― SK C&C, SK Holdings, SK Gas Co., SK Telecom and SK E&S ― as a prelude to summoning of suspects including Chey and his younger brother Jae-won, the group’s vice chairman. More SK offices were searched on Wednesday.

The Korea Exchange on Wednesday demanded SK Telecom, the country’s No. 1 mobile carrier, and SK Gas, Korea’s biggest distributor of liquefied petroleum gas, make public disclosure of the news reports on embezzlement allegations.

Prosecutors suspect that some of the SK affiliates’ 280 billion won investment in Benex Investment, a financial firm owned by former SK Telecom executive Kim Jun-hong, was channeled to create slush funds for the Cheys.

Prosecutors found that 99.2 billion won of it was transferred to Kim Won-hong, an astrologist and ex-advisor to SK Shipping in charge of Chey’s investment in futures, via accounts held by Kim Jun-hong under borrowed names. The prosecution is seeking cooperation from the Chinese authorities to summon Kim Won-hong, who is currently staying in China.

The prosecution alleges that the younger Chey led the money laundering scheme with his older brother involved. The Chey brothers could be charged with embezzlement and breach of trust.

The investigation of SK Group stemmed from an inquiry into an alleged stock price manipulation by Gloworks CEO Park Sung-hoon which implicated Kim Jun-hong. The prosecution’s search of a Benex Investment office in March found checks worth 17.3 billion won belonging to the younger Chey.

Chey Jae-won allegedly diverted funds from three affiliate companies and subcontractors to create a slush fund.

Kim was indicted and detained in May for violation of the securities trading law, released on bail a month later and is currently standing trial.

The other key suspect Kim Won-hong, a brokerage employee-turned-astrologist, is known to have provided investment advice to former SK chairman Sohn Gil-seung when he embezzled 780 billion won out of SK Shipping to invest in overseas futures. Sohn was indicted in 2003 on charges of embezzlement.

Some 200 billion won of the 500 billion won Chey invested in futures came from the astrologist’s account. Kim filed a complaint to the tax tribunal for the taxation of over 60 billion won for his donation to Chey. Kim fled to Hong Kong in March and is now hiding out in China.

The prosecution also searched the Seoul Regional Tax Office on Tuesday after finding that its former inspection chief Lee Hee-wan received 50 million won each month ― more than 3 billion won in total ― in advisory fees from an SK affiliate since his retirement in June 2006. Prosecutors suspect that the money could have been given in exchange for Lee’s help in easing tax inquiries on SK Group while he was in office.

By Kim So-hyun (sophie@heraldcorp.com)