Prosecutors raided the head offices of Dongkuk Steel, Korea’s third-largest steel company, and the residence of its Chairman Chang Sae-joo as part of a probe into allegations of embezzlement and tax evasion within the firm

http://www.koreatimes.co.kr/www/news/nation/2015/03/116_176109.html

Updated : 2015-03-29 20:26

Dongkuk Steel offices raided over embezzlement allegations

By Chung Hyun-chae

Prosecutors raided the head offices of Dongkuk Steel, the nation’s third-largest steel company, and the residence of its Chairman Chang Sae-joo as part of a probe into allegations of embezzlement and tax evasion within the firm.
About 50 investigators from the Seoul Central District Prosecutors’ Office seized accounting books, overseas trade records, and related computer files from the company’s headquarters in central Seoul and the offices of its affiliates from Saturday through early Sunday morning.The prosecution also imposed overseas travel bans on Chang and 10 key executives who are allegedly involved in the case.
Dongkuk is suspected of having stashed about 10 billion won ($9 million) in illegal funds by inflating the prices of raw materials they purchased from overseas.
The company deposited most of the stashed money in the bank account of its U.S. unit. The tax authority earlier conducted an inspection of the firm to trace its dubious money flow.
Dongkuk also faces other allegations that it fabricated the amount of raw materials purchased from Russia and Japan and inflated the cost of building a power plant in Dangjin, South Chungcheong Province.
The company is also suspected of having affiliates, such as Ferrum Infra, a real estate agency in which Chang’s family holds a stake, create slush funds.
Chairman Chang faces allegations about his own irregularities.
He is suspected of gambling overseas at luxurious hotels in Las Vegas by using part of the firm’s embezzled money, some $2-3 million.
“We will take stern action against those committing illegal acts,” an investigator said.
Prosecutors may summon Chang after the firm’s accounting and management officials for questioning about the allegations.
A Dongkuk Steel official said, “Given that no serious violation of the law has been found so far, there’s nothing we can say.”
Dongkuk previously underwent a special tax audit after similar allegations were made in 2011.
The National Tax Service investigated the company for eight months for allegedly inflating the cost of the goods purchased from overseas including the U.S. and Southeast Asia, and creating slush funds with the money.
It was suspected that Chang used the slush funds for personal purposes including gambling, but the investigators did not find clear evidence to confirm the suspicions.
Some industry observers say that the prosecution has launched the investigation because it has obtained evidence to confirm the allegations.
The investigation is also part of the government’s anti-graft drive. Many other public and private companies have been under a probe, including Keangnam Enterprises, the Korea National Oil Corp., POSCO Engineering & Construction, and Lotte Group.

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