Hyosung Group Chairman Cho Hyun-joon
South Korea’s Fair Trade Commission (FTC) filed for prosecutorial probe into Hyosung Group Chairman Cho Hyun-joon, accusing him of profiteering from illicit deals among group companies.
Cho faces additional counts as he has already been indicted on charges of corruption and embezzlement of 20 billion won ($18.9 million) in January. He is the grandson of Hyosung Group founder Cho Hong-je and took over the helm of Korea`s 25th largest conglomerate from his father Cho Suck-rai last year.
The country’s antitrust watchdog said Tuesday that it asked the prosecution to investigate Hyosung Corp., the de facto holding entity of the industrial conglomerate, and Hyosung Investment & Development Co., the group’s real estate development unit, and Galaxia Electronics Co. in which Cho owns the largest stake at 68.3 percent. The FTC slapped a combined fine of 3 billion won on the firms - 1.7 billion won on Hyosung for spearheading the plan, 1.2 billion won on Galaxia Electronics for receiving illegal financial assistance and 40 million won on Hyosung Investment for unfairly financing the cash-strapped Galaxia.
This is the first time the FTC has pressed criminal charges on family-run chaebol entities.
Shares of Hyosung closed Wednesday down 0.83 percent to 119,500 won.
The FTC found that Hyosung Investment had been forced to offer payment guarantee for Galaxia to help it issue convertible bonds to raise 25 billion won at a 5.8 percent interest rate, lower than the actual rate for the company`s bond, when it suffered from financial shortages. Galaxia Electronics, a LED light manufacturer, recorded operating losses for three consecutive years in 2014 when its losses reached 15.7 billion won. Cho pocketed at least 960 million won from the shady deal that brought more than 1.5 billion won worth of financial gains to Galaxia, the watch dog said, while Hyosung Investment could not carry out proper business activities with half of its assets tied up as security.
The FTC also concluded that the illegal deal undermined fair competition in the LED lighting market by unfairly saving Galaxia that would not have survived on its own, as well as contributed to defending Cho’s reputation. Hyosung said it will dutifully comply with the prosecution probe, but claimed Cho was not involved in the deal.
By Seok Min-soo and Choi Mira
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