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Prosecution raids Shinhan Bank over CJ Group's slush fund probe

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(GlobalPost/GlobalPost)

SEOUL, May 29 (Yonhap) -- Prosecutors on Wednesday raided the headquarters of Shinhan Bank as part of an investigation into allegations that CJ Group, a food and entertainment conglomerate, managed a massive slush fund overseas and evaded taxes.

The prosecution has been looking into the origin and use of 24 billion won (US$21 million) that the Tokyo branch of Shinhan Bank, South Korea's No. 3 lender, loaned to CJ Group's overseas corporate body.

A team of investigators and prosecutors of the Seoul Central District Prosecutors' Office seized relevant documents during the raid at the bank's headquarters in central Seoul.

The prosecution probe is expanding as evidence emerged that CJ Group Chairman Lee Jay-hyun and his family were allegedly involved in organized tax evasion, slush funds and holding additional assets under borrowed names.

The prosecution office is focusing on determining whether the family-run conglomerate has illicit assets in addition to those revealed five years ago.

In 2008, police revealed that Lee had secretly managed large funds under borrowed-named bank accounts and ordered him to pay 170 billion won 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.

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

In connection with the Wednesday's raid, prosecutors on Tuesday summoned an employee of the bank's Tokyo branch for questioning over details regarding the loan, officials said.

The extensive investigation is looking into other suspicions that CJ group funneled huge amounts of secret money to their offshore accounts such as Hong Kong and the British Virgin Islands, a well-known tax haven.

Prosecutors are currently tracing overseas bank accounts of CJ Group with help of international financial authorities to secure evidence that it established tens of shell companies overseas to make these illicit money transactions look normal and to dodge a huge amount of taxes.

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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