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Paradise Papers target chaebol

Leaked dossier reveals how Korea’s rich move their wealth abroad
Nov 07,2017
Over 200 Korean entities, including businesses like the state-owned Korea Gas Corporation, are among the high-profile figures with offshore investments in the so-called Paradise Papers released Sunday by the International Consortium of Investigative Journalists and its Korean partner Newstapa.

The leaked data from the offshore law firm Appleby showed that 80 Korean paper companies were created in tax havens to avoid double taxation.

Hyundai Yemen LNG in Bermuda is one of them. In 2006, Hyundai Corporation was running into financial troubles and reached an agreement with the Korea Gas Corporation to sell half of its 5.88 percent stake in a liquefied natural gas field in Yemen.

The transaction was done through a paper company in Bermuda, according to the Paradise Papers, which also revealed that the Korea Gas Corporation had paid more for the stake than previously thought.

Hyosung, which has a business empire spanning chemicals, trade and construction, also created paper companies to avoid paying taxes on profit that the owner family accumulated.

Four of them, according to the dossier, were created in the tax haven of Guernsey in the English Channel in 2005. They were used to store about 7 billion won ($6.3 million) in profit from Hyosung stock owned by the controlling family.

About 5.5 billion won, according to the papers, were then transferred to another paper company in the Bahamas before finally reaching another paper company in the United States owned by Hyosung’s chairman, Cho Hyun-joon.

The Cho family created another paper company in the Cayman Islands in February 2006. The purpose of the company remains unknown, but the dossier revealed that in 2012, the paper company had received a large sum of money from Korea. The equivalent public filing in Korea, though, showed much less had been transferred.

The documents also contained information about North Korean paper companies. One in Malta was used to avoid international sanctions by transferring wages from overseas North Korean workers back to Pyongyang.

The Paradise Papers are considered the biggest leak of offshore investment data as they are based on Appleby’s 13.4 million internal documents containing nearly seven million loan agreements, financial statements, emails and deeds compiled between 1950 and 2016.

The documents were obtained by the German newspaper Suddeutsche Zeitung, the same media organization that obtained the Panama Papers last April which raised speculation about tax evasion by the eldest son of former Korean President Roh Tae-woo as well as the daughters of AmorePacific founder Suh Sung-whan.

In other countries, the Paradise Papers revealed that Queen Elizabeth II held investments in a loan company criticized for its predatory business strategy and U.S. Commerce Secretary Wilbur Ross had stakes in a shipping company with ties to Russian President Vladimir Putin’s son-in-law.

The International Consortium of Investigative Journalists and Newstapa have promised to release more information from the leaked documents this week.


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]