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Ex-officials at state-run deposit insurer set up paper companies in tax havens

SEOUL, June 15 (Yonhap) -- Former officials at the country's state-run deposit insurer set up shell companies in a tax haven, an independent South Korean online news outlet said Saturday, in its latest revelation of a list of names that also includes three other Korean businessmen.

Kim Gi-don, president of a unit of the state-run Korea Deposit Insurance Corp. (KDIC), and five other officials at the KDIC, set up two ghost companies in the British Virgin Islands in 1999, the Korea Center for Investigative Journalism (KCIJ) said.

The establishment of the paper companies came as the country was hit by an unprecedented financial crisis in late 1997.

The KDIC said the ghost companies were used to retrieve overseas assets held by then financially ailing companies into which bailout funds were injected. The deposit insurer claimed that it recovered more than US$2 million in taxpayer money through the paper companies.

The KCIJ, however, said the country's financial regulator was not aware of the KDIC setting up such paper companies to collect public funds.

Since late May, the KCIJ has released the names of high-profile South Koreans, including the son of a former president, who allegedly set up paper companies in tax haven regions for tax evasion purposes or to stash away slush funds.  

According to the KCIJ, Chun Jae-kook, the eldest son of former president Chun Doo-hwan, who took power through a military coup in 1979, was found to have established a ghost company in the British Virgin Islands in 2004 sparking speculation that he may have tried to hide his father's massive slush funds, which the government has failed to collect for years.

The findings are based on a joint investigative journalism project by the South Korean news outlet and the Washington-based International Consortium of Investigative Journalists (ICIJ). The South Korean journalists have been taking part in the project since April.