Fair Trade Commission Files Charges Against KCC Chairman Jeong Mong-jin for Deliberate Omission of Affiliate Submissions

2016~2017 Years 10 Companies Including Self-Owned Nominee Companies and Relatives' Supplier Firms Omitted
Fair Trade Commission "High Possibility of Awareness of Legal Violations and Significant Seriousness"

[Sejong=Asia Economy Reporter Kwon Haeyoung] Chung Mong-jin, chairman of KCC, has been reported to the prosecution for 'submission of false designated materials.'

The Fair Trade Commission (FTC) announced on the 8th that it has reported to the prosecution Chairman Chung Mong-jin, the same person (the subject controlling the corporate group·head) of KCC, a mutual investment restriction corporate group, for deliberately omitting 10 companies including nominee-owned companies and suppliers held by the head family, and 23 relatives when submitting materials for designation as a large corporate group from 2016 to 2017.

An FTC official explained, "The possibility of awareness of the same person's violation of the law is significant and its seriousness is considerable," adding, "It met the criteria for prosecution under the guidelines for reporting violations of corporate group-related reporting and material submission obligations."

The problematic Silbaton Acoustics was effectively 100% owned by Chairman Chung since its establishment but was registered under the name of a nominee shareholder. Chairman Chung submitted materials regarding this to the FTC in 2018, after the fact of nominee ownership was revealed during a National Tax Service audit in 2017.

Chairman Chung also deliberately omitted the submission of designated materials for nine companies, including Dongju, Dongju Sangsa, and Dongju P&G, which are 100% owned by relatives. The family recommended unincorporated affiliates as suppliers to KCC, and Chairman Chung approved related transactions around 2016 in his capacity as KCC’s representative. The FTC judged that seven companies including Dongju had a high proportion of internal transactions with KCC, and it is highly likely that Chairman Chung was aware of them as the family recommended them as suppliers.

An FTC official stated, "By using nominee shareholders and concealing relatives, it made it difficult for external monitoring systems (regulatory agencies, civic groups, etc.) to confirm the existence of unincorporated affiliates and blocked the application of large corporate group regulations," adding, "The seriousness of the violation was considerable, as the omission of affiliates resulted in KCC being excluded from the designation as a mutual investment restriction corporate group from September 2016 to April 2017."

The FTC plans to strictly sanction the omission of affiliates and relatives going forward.

An FTC official said, "The FTC will continue to thoroughly investigate disguised affiliates through nominee shareholders and omission of relatives in large corporate groups and take strict action when detected," adding, "To effectively monitor disguised affiliates, a reward system for reporting disguised affiliates will be introduced and implemented in May this year."