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SK Group in Crisis Due to Poor Corporate Ethics, Chairman’s Alleged Tax Evasion
Terrible Business Ethics
SK Group in Crisis Due to Poor Corporate Ethics, Chairman’s Alleged Tax Evasion
  • By marie
  • July 11, 2016, 01:15
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SK Group chairman Chey Tae-won.
SK Group chairman Chey Tae-won.

 

SK Group, the nation’s third-largest conglomerate has the most offshore companies in tax havens among the nation’s top four business groups, according to market data. SK Chemicals, a chemical unit of the group, is also suspected of having sold the raw materials of problematic humidifier sterilizers while being aware of its ingredient toxicity. Moreover, gas stations under direct management of its subsidiary were caught producing fake diesel, indulging poor business ethics these days.

According to the recent data released by Korea 20,000 Corporate Research Institute, 120 companies, 8.6 percent of 1,402 overseas subsidiaries owned by the nation’s four largest conglomerates – Samsung, Hyundai Motor, LG, and SK – are located in in tax havens. SK set up 73 paper companies in the havens, the highest number among the top four conglomerates in Korea. The figure accounts for 60.8 percent of the total subsidiaries operated by the four leading business groups in the havens and 25.3 percent of the total overseas subsidiaries operated by SK Group. 

By country, 35 of SK Group’s companies are located in Hong Kong and 27 on the Cayman Islands. Prostar Capital Ltd., one of its companies on the Cayman Islands, also set up Prostar Capital Management again, operating 6 offshore companies in the Cayman Islands, the United States and Australia. Also, Hermed Capital has three overseas subsidiaries in China, the Cayman Islands and Hong Kong. So, investments of SK Holding C&C, SK Innovation and SK Telecom go to six countries passing through six stages.

It is not illegal for companies to set up subsidiaries in tax havens and it is inevitable for them to do so in order to reduce their corporate taxes. However, there are high possibilities of misuse for tax evasion by creating slush funds through the offshore companies.

Meanwhile, SK Chemicals, formerly Yukong Bioteck, sold raw materials of humidifier sterilizers – PHMG, CMIT and MIT – to Oxy Reckitt Benckiser and Aekyung in 1994, even after being aware of the toxicity. At that time, however, Yukong didn’t inform Oxy Reckitt Benckiser about the harmful risks and sold them as the ingredients of humidifier sterilizers. A total of 27 died allegedly from using Aekyung’s Humidifier Mate, which has been made of CMIT and MIT from SK Chemicals.

In addition, the financial regulator launched an investigation into SK Group Chairman Chey Tae-won's mistress over his alleged violation of the foreign exchange trade law and tax evasion by not reporting the sale of her apartment in Seoul right after he returned to the top management two years after he had been forced to resign from the boards of all SK companies in March 2014 due to criminal cases. Even Son Kil-seung, former SK Group Chairman and the current honorary chairman of SK Telecom, was booked without physical detention over allegedly sexually harassing a bar worker in her 20s. Accordingly, criticism against SK Group grew due to poor business ethics and scandals of its chairman and former professional CEOs.