Prosecutors Indict LIG Group Owner Family for Tax Evasion Amounting to 130 Billion Won

Former LIG Construction Vice President Gu Bon-yeop, who was summoned to the prosecution as a suspect in connection with the alleged improper issuance of CP (commercial paper) by LIG Construction, is leaving after a 19-hour overnight investigation at the Central District Prosecutors' Office in Seocho-dong, Seoul, in the early morning of the 18th.

[Asia Economy Reporter Song Seung-yoon] Koo Bon-sang (50), chairman of LIG Group, and Koo Bon-yeop (48), former vice president of LIG Construction, have been indicted on charges of tax evasion amounting to approximately 130 billion KRW.

The Tax Crime Criminal Division of the Seoul Northern District Prosecutors' Office (Chief Prosecutor Han Tae-hwa) announced on the 17th that a total of six people, including Chairman Koo, former Vice President Koo, and four current and former executives of LIG Group and its affiliates, were indicted without detention on charges of violating the Act on the Aggravated Punishment of Specific Crimes (tax evasion).

Chairman Koo and others are accused of falsely valuing LIG’s stock price at 3,846 KRW per share instead of the actual valuation of 10,481 KRW per share, which reflected the public offering price of its subsidiary, the defense company LIG Nex1, in May 2015. One month later, they allegedly manipulated financial transactions by transferring the sales proceeds to employees at the falsely evaluated price.

According to the prosecution, since LIG Nex1’s securities registration was executed in August 2015, the LIG stock transactions in June should have applied the LIG Nex1 public offering price. However, Chairman Koo and others manipulated the timing of shareholder registry and stock certificate name transfers to April, lowering the reported transaction price to 3,876 KRW per share instead of the 12,036 KRW per share reflecting LIG Nex1’s public offering price.

As a result, the prosecution estimates that Chairman Koo and others evaded a total of approximately 132.9 billion KRW in taxes, including about 91.9 billion KRW in gift tax, approximately 39.9 billion KRW in capital gains tax, and over 1 billion KRW in securities transaction tax.

The prosecution began the investigation in March this year following a report from the Seoul Regional Tax Office and conducted four raids on LIG Group offices between June and December. Over 30 company officials, including Chairman Koo, were questioned more than 60 times.

Meanwhile, Chairman Koo and former Vice President Koo were previously indicted in November 2012 on charges of issuing fraudulent corporate bonds (CP) worth about 200 billion KRW, and in 2017, the Supreme Court confirmed prison sentences of four years and three years, respectively.

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