Police raid Hanjin KAL over suspected improper donation of treasury shares to defend control

Police have raided Hanjin KAL over suspicions that the company used treasury shares to help defend management control. The holding company, which owns Korean Air as an affiliate, faces scrutiny over a donation that it described as a welfare measure for employees.

The Seoul Metropolitan Police Agency’s financial crimes investigation unit reportedly searched Hanjin KAL and related locations on allegations including violations of the Capital Markets Act. Investigators are expected to review the materials seized during the operation to determine whether the donation process and internal decision-making involved any illegality.

The case follows a complaint filed last May by the civic group Citizens’ Committee for People’s Livelihood Measures. The group accused Hanjin Group Chairman Cho Won-tae and Hanjin KAL CEO Ryu Kyung-pyo of embezzlement under the Act on the Aggravated Punishment of Specific Economic Crimes, as well as violations of the Capital Markets Act.

The complaint came after Hanjin KAL’s second-largest shareholder, Hoban Group, disclosed that it had raised its stake from 17.44% to 18.46%. Three days later, Hanjin KAL announced that it would contribute 440,044 treasury shares, or 0.66% of the company, worth about 66.3 billion won, to an employee welfare fund. Hanjin KAL said the decision aimed to improve employees’ financial security and welfare, but some observers questioned whether the move also served to protect management control.