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Prosecution traces origin of assets in borrowed-name accounts

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(Globalpost/GlobalPost)

SEOUL, May 28 (Yonhap) -- Prosecutors are tracing the origin of assets hidden under borrowed-name accounts dating back to 2008 as part of their probe into allegations that a local food and entertainment conglomerate amassed a massive slush fund offshore and evaded taxes, sources close to the investigation said Tuesday.

In 2008, police revealed that CJ Group Chairman Lee Jay-hyun had secretly managed large funds under borrowed-named bank accounts and ordered him to pay 170 billion won (US$151 million) in taxes. However, the National Tax Service (NTS) did not file a criminal complaint against the company at the time.

CJ Group claimed Chairman Lee had inherited the funds from his grandfather and the founder of Samsung Group, Lee Byung-chull, and the group had paid the 170 billion won in taxes.

Lee Jay-hyun is the eldest son of Lee Maeng-hee, who is the elder brother of Lee Kun-hee, chairman of Samsung Electronics Co.

The Seoul Central District Prosecutors' Office, however, believes that the country's 14th-largest conglomerate allegedly amassed slush funds in borrowed-name accounts, estimating that the amount could reach over hundreds of billions of won, they added.

The ongoing prosecution probe into CJ dates back to 2008, when one of the group's former financial officials, only identified by his surnamed Lee, was accused of hiring a hit man to kill a private moneylender.

A lower court sentenced the former employee to six years in prison but an appellate court acquitted him, citing the lack of proof. His acquittal was upheld by the Supreme Court in 2012.

The financial official testified during an appeals trials that he had managed the slush funds worth hundreds of billions of won for the business group, according to court records.

After a nearly six-year-long internal probe, prosecutors earlier this month raided a Seoul regional tax office under the NTS to seize tax records to look into suspicions that the group evaded taxes.

Officials of the Seoul Regional Tax Office in central Seoul handed over detailed tax records of CJ Group dating back to 2008 to investigators, officials said.

The statute of limitations for tax evasion exceeding 1 billion won is seven years, they added.

The extensive probe is looking into other suspicions that owners of CJ Group have engaged in organized tax evasion through funneling huge amounts of secret money to their offshore accounts in Hong Kong and the British Virgin Islands, a well-known tax haven.

Last week, the country's financial watchdog began its own investigation to see if any local company had manipulated stock prices on the Seoul market with money brought in from a tax haven country.

The probe by the Financial Supervisory Service centers on allegations of unfair business practices that include stock price manipulation and use of undisclosed inside information.

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