Company that owned ill-fated S Korea ferry has chequered past

SEOUL - The company that owned the South Korean ferry which sank last week, killing possibly hundreds of people, sprang out of a shipping to cosmetics empire founded by a businessman who was jailed for fraud and then went bankrupt.

The founder of the predecessor company, Yoo Byung-un, once likened his 1997 bankruptcy proceedings to a captain going down with his ship. An investment vehicle run by his two sons and its shipbuilding affiliate are now the majority owners of Chonghaejin Marine Co. Ltd, the operator of the ferry that capsized.

There is no suggestion that last Wednesday's accident was in any way linked to the company's chequered history. But Yoo and his two sons have been barred from leaving South Korea as investigators seek to establish what led to the fatal sinking of the Sewol ferry.

Of the 476 passengers and crew on board, 339 were children and teachers on a high school outing. Only 174 people have been rescued and the remainder are all presumed to have drowned, a disaster that has shocked South Korea.

Officials said on Tuesday they had launched investigations this week into tax issues and possible illegal foreign currency transactions by the company and by the Yoo family.

An official at the Financial Supervisory Service told Reuters that the financial regulator is investigating whether Chonghaejin Marine or the Yoo family engaged in any illegal foreign exchange transactions without elaborating further.

Another person familiar with the matter told Reuters that the prosecutors are looking into potential tax evasion by the unlisted firm, its affiliates or the Yoo family. A spokesman at the tax agency declined to comment on the matter.

No one was available for comment at either the company or the family. Neither of the regulatory officials were willing to be named, citing the confidential nature of the investigation.

Yoo was jailed for four years in the early 1990s, according to court proceedings at the time, for his role in colluding with one of his employees to defraud a group of people of 1.2 billion won ($1.15 million).

The 73-year-old is typical of the entrepreneurs who helped transform South Korea from one of the poorest countries in the world to one of the richest in a generation, a process dubbed"The Miracle on the Han River" after the river that runs through the capital Seoul. "Yoo had business skills. Once he took over a bankrupt textile company and then expanded it into toy exports. Later he even got a state award for strong export performance and further expanded into shipbuilding and ferry operation," said a source who had worked for Yoo for nearly a decade.

Yoo and his sons did not respond to requests for comment on the company's history. No one would go on the record to discuss the family or their business interests.

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