CJ Group-overseas business

SEOUL, May 23 (Yonhap) -- The ongoing investigation into CJ Group's slush fund allegations may hamper the local food and entertainment conglomerate's overseas business projects and lower its credit ratings, a report said Thursday.

On Tuesday, prosecutors raided the headquarters and offices of the country's 14th largest conglomerate on suspicion of creating an overseas slush fund worth 7 billion won (US$6.2 million) and bringing the money into the country. The group is also accused of committing other illegal acts such as tax evasion.

In 2008, tax authorities detected that CJ group was managing a fund worth nearly 400 billion won using borrowed-name accounts. The National Tax Service (NTS) levied taxes worth 170 billion won on the group. Under the financial law introduced in 1993, it is illegal to use borrowed names for financial transactions.

"Lee Jay-hyun, chairman of CJ Group, was not criminally punished for the 2008 tax evasion case, but there is a possibility that he will face judicial action this time," said Park Joong-seon, an analyst at Kiwoom Securities Co., in his report.

CJ Foodville Corp., the group's franchise restaurant operator is aiming to increase the number of its overseas franchises and the company-operated restaurants to up to 4,700 from the current 133 by spending up to 100 billion won between 2013 and 2017.

Park said CJ Foodville's overseas investment plan may be canceled or delayed due to the slush fund investigation.

It is questionable whether aggressive overseas investments from the group's two units of CJ CGV Co. and CJ Korea Express Corp. will be made as it was revealed that they established their overseas units in the British Virgin Islands, a tax haven, he added.

Park said he will lower his investment ratings for CJ Group's subsidiaries if the group's chairman is arrested and the group cancels its overseas investment plan.

Meanwhile, the CJ chairman has been under fire for holding multiple positions on the boards of the group's subsidiaries.

He has membership on the boards of eight subsidiaries--CJ Corp., CJ CheilJedang Corp.,CJ CGV Co., CJ Korea Express, CJ E