You are here
Home > Fattening Food > Taekwang fined for fattening owners' personal pockets

Taekwang fined for fattening owners' personal pockets


Former Taekwang Group Chairman Lee Ho-jin walks into the Seoul High Court in Seocho-gu, Seoul, on Feb. 15, to stand trial for a number of charges including embezzlement. Yonhap


By Nam Hyun-woo

Seen above is Heungkuk Life Insurance headquarters in Gwanghwamun, Seoul, where former Taekwang Group Chairman Lee Ho-jin has his office. Korea Times file

Taekwang Group was found to have illegally mobilized its units to purchase kimchi made by a company under the control of former Chairman Lee Ho-jin to fatten his pocket, according to the Fair Trade Commission (FTC) Friday.

Units of the textile-oriented mid-tier business group bought 10 billion won ($8.43 million) worth of kimchi and gave it to employees as part of their wages, the antitrust agency said.

Also, the kimchi was priced at least six times higher than the average consumer price even though the company was found have violated the Food Sanitation Act. The textile-to-finance conglomerate even used wine worth 5 billion won to benefit the Lee family using a similar tactic.

The FTC said it has fined Taekwang units 2.18 billion won and decided to file complaints with the prosecution against Lee and a number of senior officials of Taekwang units.

Lee resigned from the Taekwang chairmanship in 2012, but the FTC recognizes him as the de facto leader indirectly controlling the group with stakes. Taekwang Group units include Heungkuk Life Insurance, textile firm Taekwang Industrial and cable TV firm T-Broad.

According to the FTC, Lee ordered Whistling Rock Country Club, a golf course under the control of Taekwang’s de facto holding firm Tsis, to produce kimchi in 2013 to recover Tsis’ faltering profits. The Lee family was holding the whole stake of Tsis. Tsis was split into Tsis and TRN April last year and TRN currently stands as Taekwang’s holding firm.

Then, Taekwang units were ordered to purchase the allocated amount of kimchi using company expenses including employee welfare benefits in 2014. Purchased kimchi was provided to the employees as part of their salary.

Tsis set the price of kimchi at 190,000 won per 10 kilograms, which is far more expensive than consumer prices, around 30,000 won per 10 kilograms.

Taekwang expanded its internal kimchi trading further in 2015, by setting up a web shopping mall and providing credits available only to purchase kimchi from the mall. Taekwang units used employee welfare funds again to pay for the credits.

According to the FTC, Taekwang units purchased 512.6 tons of kimchi which totaled 9.55 billion won from the country club from 2014 to 2016. During the period, Whistling Rock Country Club logged an operating profit ratio of between 43.4 percent and 56.2 percent, which was up to 14.4 times higher than the average Korean food companies’ operating profit ratio in 2016 and 2017.

The country club outsourced the kimchi making to a farmers’ cooperative in Gangwon Province, but was fined by a local government for operating a food business without sanitary certification.

Along with kimchi, Taekwang units have purchased wines worth 4.6 billion won from wine dealer Mervin and exchanged them between units as gifts from 2014 to 2016, following orders from Lee. Mervin was also a company owned by the Lee family.

The FTC assumed the Lee family has raked in at least 3.3 billion won in dividends through such practices, with the kimchi trading accounting for 2.6 billion won.

“This bears importance in punishing conglomerate units’ organized internal trade which resulted in unfair benefits to the owner family,” an FTC official said.

Currently, Lee is serving a prison term after the Seoul High Court found him guilty of embezzlement and breach of trust.



Source link

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Top