Prosecutors investigating allegations of tax evasion and a slush fund formed by CJ Group raided the home of the group’s chairman Lee Jay-hyun on Wednesday.

The investigators also raided the headquarters of Shinhan Bank over the 24 billion won ($21 million) loan the bank gave to Pan Japan, a Japan-based company said to be operated by the chief of CJ Group’s Japanese branch.

Ahead of the raid on the bank, an employee of Shinhan Bank’s Tokyo branch was summoned for questioning on Tuesday.

Along with the raids, the prosecutors are said to be preparing to summon Lee and other key CJ Group officials including a former CJ executive identified by the surname Shin for questioning early next month. Shin is thought to have been in charge of Lee’s hidden accounts until 2007, and is suspected of managing the CJ chairman’s slush funds in overseas accounts.

Lee is suspected of hiding assets under borrowed names in overseas accounts to evade taxes, and of using the funds to manipulate stock prices of CJ Group companies to consolidate his control over the country’s 14th-largest conglomerate. Lee is the eldest son of Lee Maeng-hee, who is the elder brother of Samsung Electronics chairman Lee Kun-hee.

As the investigation continues, investigators from the Seoul Central District Prosecutors’ Office are said to be focusing on determining whether the group has illicit assets in addition to those revealed in 2008. At the time, the group paid 170 billion won ($151 million) in taxes for assets inherited from Samsung Group founder Lee Byung-chull that had been held under borrowed names.

The investigators have also requested cooperation from authorities in Hong Kong, the British Virgin Islands and other countries where the CJ chairman is suspected of holding accounts under borrowed names.

According to reports, the investigators have secured evidence that CJ Group’s special purpose company in Hong Kong borrowed more than 200 billion won from banks to invest in other countries. The Hong Kong-based operation is suspected of siphoning off the profits from the investments.

In addition, more than 100 billion won from CJ Group affiliates is thought to have been directed to the company in Hong Kong.


By Choi He-suk
(cheesuk@heraldcorp.com)