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Doosan Accused of Insider Trading
Doosan Group Chairman Park yong-sung

Doosan Group is facing sanctions from the Fair Trade Commission (FTC) for its alleged illegal funding of affiliated companies.

The antitrust regulator said it has verified some allegations during its several month-long investigation of the Doosan Group and plans to hold a panel-discussion soon to decide whether to impose fines.

According to FTC officials as quoted by Yonhap News, two Doosan business units - Doosan Industrial Development and Doosan Heavy Industries & Construction - have unfairly supported other units in the group, including the consulting arm, Neoplux, by paying higher purchase prices.

The two subsidiaries have also allegedly paid the interest on loans taken out by other units.

An FTC official said the regulator plans to conduct an analysis of the case soon for a final ruling.

Doosan Group was troubled two years ago by an internal dispute when Park Yong-sung, its former chairman, and his brother were sentenced to suspended prison terms for creating slush funds and accounting fraud.

Doosan Industrial Development was slapped with a fine of 2 billion won by financial regulators for a series of accounting irregularities worth 370 billion won from the 1990s.

The company had admitted that it cooked its accounting books to cover up losses resulting from unprofitable construction projects between 1995 and 2001, when Park was at the group's helm.

Doosan Industrial Development is the construction arm of the Doosan Group. It had inflated profits and assets by some 290 billion won, the commission said. It also created a slush fund of 22 billion won for its executives by overstating payments to subcontractors.

Doosan admitted its accounting irregularities in 2005 when the members of the founder's family engaged in a dispute over the group's control. The prosecution charged four members including ex-chairman Park Yong-sung and 10 executives in November, but their cases are still pending.

The company merged with Korea Industrial Development in 2004.

The FTC is also investigating Hyundai-Kia Automotive Group on suspicions of illegal insider trading.

Last year, the antitrust regulator said it began closely monitoring about ten business groups deemed prone to committing irregular cross-unit transactions though it did not specify the names of conglomerates.

"Major groups are included in the list," FTC official said. Korea's big groups include Samsung, SK, LG, GS, Lotte, CJ, KT, Hanjin and Hanwha.

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