Fake Tax Invoice Created 20 Billion Hidden Funds... Pharmaceutical Company Executives Face Trial

Bribery Used to Dismiss Tax Investigation...Bribed Officials Also Face Trial

Executives of a mid-sized pharmaceutical sales agency who created slush funds exceeding 20 billion won and evaded corporate taxes by issuing false tax invoices through fictitious transactions without actual deals have been brought to trial.

The Seoul Central District Prosecutors' Office Tax Crime Investigation Division (Chief Prosecutor Lee Jin-yong) indicted nine individuals, including executives of pharmaceutical sales agency Company A, tax agents, and representatives of four companies involved in fictitious transactions, as well as six corporations on the 9th. Among them, Company A CEO Choi and one other were indicted while in custody.

A bundle of cash discovered during the search and seizure. [Image source = Seoul Central District Prosecutors' Office]

Choi and two other executives are accused of creating approximately 22.5 billion won in slush funds from August 2014 to March this year by pretending to conduct transactions with four subordinate sales agencies despite no actual dealings, paying the funds, and then receiving cash back excluding commissions.

The amount falsely recorded during this period reached 25.4 billion won. Through this, Choi and others evaded about 3 billion won in corporate taxes over five years. From November 2019 to September last year, they obstructed tax investigations by manipulating and submitting evidence of actual transactions and bribed the company’s tax agent with 290 million won to suppress the tax investigation.

In response, the tax agent was investigated for delivering a total of 189 million won as bribes or for solicitation to five current and former tax officials, including a local National Tax Service team leader and tax office employees, from March 2021 to June 2022.

The five tax officials who received the money were indicted on the 1st on charges of bribery and solicitation. Among them, the local National Tax Service team leader and a former tax official turned tax accountant, who received 80 million won and 54 million won respectively, were indicted while in custody.

After receiving related investigative intelligence in January, the prosecution conducted seven raids from February to July on the National Tax Service, Company A, Company B, and others. The investigation revealed that Company A’s executives divided roles with a certified public accountant handling tax affairs, manipulating evidence such as prescription performance statistics to evade tax investigations. They were never caught for fictitious transaction charges even once.

The prosecution stated, “Company A’s executives have regularly replaced fictitious transaction companies over more than ten years, obtaining immunity by persuading transaction partners or manipulating evidence. After receiving a rumor-based tip about one fictitious transaction company, we secured physical evidence by conducting multiple raids and thoroughly investigating Company A’s actual transaction data.”