Police Search Korean Air Office as Moon Gets Tough on Conglomerates

  • Chairman Cho Yang-ho accused of misusing company funds
  • Spokesman says carrier will cooperate in the investigation

South Korea’s police raided the head office of Korean Air Lines Co. in Seoul on Friday to probe alleged misuse of company funds, the first crackdown on a major local conglomerate after President Moon Jae-in came to power in May.

Police are investigating allegations that Chairman Cho Yang-ho, the head of Hanjin Group that controls Korean Air, had interior work done in his house between May 2013 and August 2014 and passed on the expenses to a hotel that was being built around the same time near the Incheon airport, the Korean National Police Agency said in a statement Friday. Korean Air will cooperate with the probe, a representative said, declining to elaborate.

Shares of the carrier fell 2.2 percent to 35,900 won in Seoul after tumbling as much as 4 percent earlier on news of the raid. No charges have been laid in the investigation.

During his election campaign, Moon had pledged to reform the family-run mega-corporations -- locally called chaebol -- saying an economic strategy focused on these groups caused low wage growth and joblessness. After taking office, Moon appointed a shareholder activist Kim Sang-jo as head of the Fair Trade Commission to closely oversee these business groups.

An influence-peddling scandal involving some of these companies led to the impeachment of his predecessor and the indictment of Jay Y. Lee, vice-chairman of Samsung Electronics Co. Lee, the de-facto head of the Samsung group, is fighting the charges. In a separate case, some Lotte Group family members face criminal charges ranging from embezzlement to fiduciary breaches amounting to about 280 billion won ($243 million). All of them have denied wrongdoing.

In his May 10 inaugural speech, Moon reaffirmed his intention to get tough on the chaebol, vowing to cut ties between the government and business groups. Before he was elected, his political party couldn’t generate enough support for legislation that would have limited the power held by the handful of rich families behind the empires. Now that he runs the government, he can issue executive orders and bypass parliamentary resistance.

The raid at Korean Air office was carried out between 9 a.m. and 12 p.m. local time, a police official said, adding contracts and other accounting documents were seized for scrutiny.

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