Former and current core leaders of the UC suspected of tax evasion and embezzlement: Police to investigate in earnest

This is a follow-up to our previously posted article here.

kib.hateblo.jp

The previous article was by Sisa Journal, and this one is by KPI News. 

m.kpinews.kr

Now you can see the translated article.

Former and current core leaders of the Unification Church, Jung Won-joo and Yoon Young-ho, suspected of tax evasion and embezzlement: Police investigating in earnest

Reporter; Song Chang-seop / 2024-08-30 15:09:36

 

Last March, a complaint was filed.

Currently under investigation by the Gyeonggi North Police.
Foundation money, invested in four companies related to the UC foundation
Raised allegations of illegal gifting.
The end of last year, the investment treated as a loss of about 100 billion won.

Hyojeong Foundation says;
“There was no tax evasion and the investment contract was carried out legally”

The UC Foundation has been embroiled in allegations of tax evasion and embezzlement. Two of the defendants, Jung Won-joo and Yoon Young-ho, are close associates of Hak Ja Han, the president of the Family Federation for World Peace and Unification. Mrs. Jung was Mrs. Han's chief of staff and Mr. Yoon was his deputy chief of staff. 

Mr. Yoon, in particular, was until recently the head of the Unification Church's world headquarters and is believed to be in charge of the organization's finances and personnel on behalf of Mrs. Han. He also served as the chairman of the board of directors of the Unification Church's Hyojeong International Cultural Foundation, which has been accused of tax evasion and embezzlement.   

The core of the allegations is that the Hyojeong Foundation, a public benefit corporation, did not use billions of won in donations for its own purposes. Therefore, the accusers claim that it was tax evasion and embezzlement. According to the Inheritance and Gift Tax Act, public interest corporations are required to use donations and other proceeds only for public purposes. Only then are they exempt from gift tax. According to the articles of incorporation, the main purpose of the Hyojeong Foundation is to provide "support for the establishment of proper values among youth".

It all started with a whistleblower. In March, Choi-Doe, a UC member, filed charges against 10 foundation officials, including former and current board members, with prosecutors. The entities in which the Hyojeong Foundation invested its donations were all founded by foundation board members and employees. This is also a legal issue related to the allegations.

There was already considerable concern and warning from within the Unification Church. In March, Min Moh, the director of Seonhak Academy, the Unification Church's school corporation, wrote in an email to the president of Seonhak Academy, “This case is legally problematic. In the worst case, you should be concerned about criminal prosecution by the National Tax Service and the relevant government agencies, or even whistleblowing, leading to media reports.”

Cheongsim International Youth Training Center, operated by Hyojeong International Cultural Foundation. [Homepage capture].

The case is currently under investigation by the Gyeonggi North Police Agency. The police have been investigating the defendants since the beginning of this month based on records of the use of investment funds. 

According to a complaint obtained by KPI News on Tuesday, the Hyojeong Foundation received donations totaling 33.8754 billion won ($33.8754 million) over a five-year period from 2018 to 2022 from the Unification Church, the Cheongshim Church, and the Hyojeong Global Unification Foundation, among other Unification Church-related organizations. Of this amount, 5.6038 billion won was donated in the name of the Unification Church World Headquarters for three years from 2020 to 2022. The head of the World Headquarters at the time was Mr. Yoon Young-Ho, who was the chairman of the Hyojeong Foundation at the same time.

Of the total donations received (33.8754 billion won), the Hyo Jeong Foundation invested 16.9131 billion won in four entities: Studio Peach, HJ Smart Education, Two Man Film, and Hyo Jeong Family Corporation. All of these companies were founded by foundation employees. The investments were outside the foundation's business purpose and therefore constituted tax evasion and embezzlement of public funds, according to Mr. Choi. 

Studio Peach is a video production company founded in July 2020 by Hyojung Foundation Secretary General Park with a capital of 10 million won; HJ Smart Edu is an educational content company founded in September 2020 by Hyojung Foundation employee Kim with a capital of 1 million won; Two Man Film is a movie production company founded in 2019; and Hyojung Family Corporation is a kids cafe operator founded in January 2021 by Hyojung Foundation Vice President Choi. All of them were named as defendants.

There are also glaring omissions and contradictions in the flow of funds. Studio Peach was supposedly paid funds (operating expenses) even before its incorporation (July 28, 2020). The Hyojung Foundation reported to the National Tax Service that it paid 342 million won to Studio Peach for operating expenses from May to September 2020. That's two months before the foundation was incorporated. Yet, in its monthly income and expenditure statement, the foundation disclosed that it spent zero won in May and June. It doesn't make sense. The audit report states that “550 million won was transferred before the contract was even signed.”

Choi also claimed, “After analyzing the Hyojung Foundation's 2021 public interest corporation disclosure data, 548.35 million Korean won for HJ Smart Edu and 680.7 million won for Hyojung Family Corporation are missing in the investment payment details.” “After checking internal investment agreements and audit reports, we found that a significant portion of the disclosures were missing,” Choi told KPI News. 

In fact, about two-thirds of the investments in the four entities have become uncollectible. According to the Hyojeong Foundation's 2023 audit report, the foundation reported investment losses (impairment losses) of KRW 957 million and KRW 9.035 billion in 2022 and 2023, respectively. Together, they totaled 9.92 billion won.  

“The fact that the investment contract stated that the company would not dispute the investment losses means that it had no intention of recovering the investment in the first place,” Choi said, adding, ”The part that was treated as an impairment loss is also suspected of embezzling public funds.”

A representative of a medium-sized tax firm, who requested anonymity, emphasized, “To prevent bad investments in public interest corporations, the management and supervision of transactions with related parties should be strengthened.”

A certified public accountant familiar with the internal affairs of public interest corporations said, “If the money invested in an entity headed by a related party is treated as a loss for no particular reason, it may lead to fraud and embezzlement issues,” adding, “It is also important to determine whether the investment target is in line with the foundation's public interest activities.”

Another issue is whether the companies are related parties. The whistleblowers argue that the transactions are related party transactions because foundation officials founded or served as principals of the companies. The foundation's position is that “all four of the companies that disbursed funds were less than 30% owned by foundation employees,” which is not an issue. The foundation's position is that the corporation and the foundation are not related parties under the Act. According to Article 12 of the Enforcement Decree of the Gift Tax Act, a foundation is considered a related party only if its employees hold more than 30% of the shares of the corporation. 

However, this does not resolve the controversy. Other laws, such as the National Tax Act, broadly define a related party as anyone who exercises “de facto influence over a corporation." “It's just a trick to avoid the issue by lowering the stake below 30 percent,” Choi said. The audit report also stated, “This is insider trading because the representative of the Hyojung Family is Mr. Choi, who is also the vice chairman of the Hyojung Foundation.”

The payment to Sunwon Construction, an affiliate of the Unification Church, for the interior construction of the Cheongshim International Training Center, was also pointed out as a problem. Choi raised the issue of inflated construction costs, saying, “In the 2019 audit report of Sunwon E&C, the amount of receivables for the remodeling of the main building of the Cheongshim International Training Center was listed as 2.827 billion won, while the amount of payables to the Hyojeong Foundation was listed as 870 million won.”

Currently, the Hyojung Foundation is reportedly claiming to the investigative authorities that there was no wrongdoing such as tax evasion and that the investment contract was signed in accordance with the procedure after reviewing the feasibility and status of the business. KPI News made several calls to the foundation to confirm the facts, but was unable to get a response.

An official from the Gyeonggi North Police Agency declined to comment on the details of the investigation, saying, “It is a complex case and it takes time to verify the facts.”

KPI News / By Song Chang-seop, Investigative Reporter