The chairman of Dong-A Socio Holdings, the holding company of Dong-A Pharmaceutical, has been detained on charges of tax evasion and offering illegal kickbacks to local doctors as bribes for prescribing the firm’s drugs.
During the suspect interrogation before detention, the Busan District Court issued an arrest warrant for Dong-A Socio Holdings Chairman Kang Jung-seok on August 7, saying, “Chairman Kang is strongly suspected of being involved in the criminal charges and he can destroy evidence.” The prosecution applied for an arrest warrant for Kang on July 2 on a charge of embezzlement, breach of medical law and tax evasion.
Prosecutors suspect that Kang has embezzled 70 billion won (US$61.72 million) from the company between 2007 and 2013. He is alleged to spend 5.5 billion won (US$4.85 million) of the funds to offer illegal kickbacks, also known as “rebates” here, to doctors at 20 hospitals across the country in return for prescribing its drugs between 2009 and this year. They also believe he dodged 17 billion won (US$14.99 million) of taxes. The Dong-A chairman also faces charges of evading around 17 billion won (US$14.99 million) in taxes from 2007 to 2011 by manipulating financial records.
Kang reportedly denied the kickback allegations, saying, “The wrongdoings were committed independently by the company’s sales representatives who want to get a promotion. The company didn’t’ involve in them and I know nothing about them.” The prosecution has investigated alleged rebate corruption on pharmaceutical companies, hospitals and the Health Insurance Review & Assessment Service from last year. In March, it raided the Dong-A Pharmaceutical headquarters, Dong-A Socio Holdings and Dong-A ST, and called in Kang to investigate.
Meanwhile, Dong-A Socio Holdings said on July 8, “We will do our best to help resolve the case in a trial in the future. We will minimize some leadership vacuum, including important decision making in the large-scale investment and new business sectors, with our team of capable professional chief executives of affiliate companies and proactively deal with the current situation by focusing the enterprise-wide capabilities at the same time.”