Korea Fair Trade Commission (KFTC) prosecuted Booyoung Group chairman Lee Joong-keun on June 18 for having tampered, for over 10 years, with data on the group’s subsidiaries required to be submitted to itself.
Chaebol reform by the prevention of unfair intra-group transactions is one of the key goals of the KFTC led by its recently appointed chief Kim Sang-jo. The prosecution is regarded as his first step towards it and strict law enforcement is expected to keep following.
From 2002 to March last year, the chairman omitted data on seven companies run by his relatives in submitting its data for designation of business groups to be subject to limitations on cross-shareholding. Although the deed continued for 14 years, the prosecution covers only the part of the omission that started in 2013 because of the five-year statute of limitations stipulated in the Criminal Procedure Code. In addition, the group wrote in the names of the chairman’s relatives and executives and staff members at its subsidiaries as the names of shareholders in six subsidiaries, such as Gwang Young Construction and Namgwang Construction, in submitting its data in 2013 even though the shares were actually held by the chairman. The names were corrected in late 2013 after the submission of the data.
“The group did not report those companies run by the relatives as its subsidiaries for an extended period of time while maintaining a large number of stocks under borrowed names, and this is why we decided to prosecute it,” the KFTC explained, adding, “Besides, the group violated the law again in spite of the punishment in 2010 for similar deeds.”
Under the circumstances, the other conglomerates are moving nimbly to avoid such restrictions. For example, the Hanwha Group is looking to merge its holding company with Hanwha S&C, which is the fully-owned subsidiary of chairman Kim Seung-yeon’s three sons that is doing business in the system integration market and has been repeatedly targeted by the antitrust watchdog for its frequent intra-group transactions. According to the Financial Supervisory Service, the ratio of Hanwha S&C’s intra-group business to its entire business jumped from 54% to 70% between 2015 and last year.