FILE PHOTO: Korean Air Lines Chairman Cho Yang-ho arrives to testify at the second court hearing of his daughter Cho Hyun-ah, also known as Heather Cho, at the Seoul Western District court in Seoul January 30, 2015. REUTERS/Kim Hong-Ji/File Photo

SEOUL (Reuters) - Police raided the headquarters of Korean Air Lines Co Ltd on Friday as part of an investigation into allegations that company funds were used to pay for construction work at the home of Chairman Cho Yang-ho.

The firm is suspected of masking interior decoration costs at Cho’s private home as expenses associated with the construction of a new hotel between May 2013 and August 2014, police said in a statement.

No suspects had been named, a police official told Reuters. A Korean Air spokesman said the airline was cooperating with police. Cho could not be reached for comment.

The firm’s shares extended losses on the news to be down 2.2 percent, while Hanjinkal, the airline’s largest shareholder, also fell 2.2 percent as of Friday’s close.

Cho’s daughter, Heather, gained international notoriety in 2014 when, as an executive of the airline, she forced a steward off one of its planes in New York because she was unhappy about the way she had been served macadamia nuts.

She served nearly five months in jail in Korea for violating plane safety.

The raids on Korean Air Lines are the first to target a major family-run conglomerate, or chaebol, since President Moon Jae-in came to power in May on the back of promises to reform the opaque business empires which dominate South Korea’s economy.

Moon was elected after a bribery scandal which led to the ouster of his predecessor, Park Geun-hye, and the arrest of Samsung Group chief Jay Y. Lee. </s> SEOUL: South Korean police said on Friday it raided the headquarters of Korean Air Lines Co Ltd as part of an investigation into embezzlement and breach of trust.

A police official said it was a probe into allegations that company funds were used to pay for construction work at the home of Korean Air Chairman Cho Yang-ho. But he added that the investigation has not yet determined who the suspects were.

A Korean Air spokesman declined to comment. The firm's shares extended losses on the news to be down 3 percent as of 0524 GMT. </s> The firm is suspected of masking interior decoration costs at Cho's private home as expenses associated with the construction of a new hotel between May 2013 and August 2014, police said in a statement.

No suspects had been named, a police official told Reuters. A Korean Air spokesman said the airline was cooperating with police. Cho could not be reached for comment.

The firm's shares extended losses on the news to be down 2.2 percent, while Hanjinkal, the airline's largest shareholder, also fell 2.2 percent as of Friday's close.

Cho's daughter, Heather, gained international notoriety in 2014 when, as an executive of the airline, she forced a steward off one of its planes in New York because she was unhappy about the way she had been served macadamia nuts.

She served nearly five months in jail in Korea for violating plane safety.

The raids on Korean Air Lines are the first to target a major family-run conglomerate, or chaebol, since President Moon Jae-in came to power in May on the back of promises to reform the opaque business empires which dominate South Korea's economy.

Moon was elected after a bribery scandal which led to the ouster of his predecessor, Park Geun-hye, and the arrest of Samsung Group chief Jay Y. Lee. </s> South Korean prosecutors are seeking to question President Park Geun-hye this week over a political scandal that has engulfed her presidency, the Yonhap news agency reported Sunday.

Prosecutors are investigating whether Park exerted improper pressure on “chaebol” conglomerate bosses to raise funds for two foundations at the center of an influence-peddling scandal involving a longtime friend of hers.

Prosecutors have already questioned the chairmen of Hyundai Motor and Korean Air Lines and plan to question the de factor head of Samsung Group and other conglomerate chiefs over the political scandal, media reports said Sunday.

Hundreds of thousands marched in the capital Seoul on Saturday demanding her resignation. Many of them said Park was unfit to rule.

Cho Yang-ho, chairman of Korean Air Lines, South Korea’s flag carrier and largest airline, appeared for questioning in front of prosecutors Sunday, Yonhap reported.

Officials at the prosecutors office could not immediately be reached for confirmation or comment.

A Hyundai Motor spokesman declined to comment and Samsung Group could not immediately confirm the report. Korean Air Lines could not be reached for comment.

Park, whose public support rating has dropped to the lowest point ever for a democratically elected South Korean leader at 5 percent, is facing growing calls for her to step down.

Park faces allegations she allowed her friend Choi Soon-sil to use her closeness to the president to meddle in state affairs and wield influence in the sports and cultural communities.

Prosecutors are investigating people close to Park over whether they had pressured dozens of the country’s biggest conglomerates to contribute to two foundations set up to support the cultural and sports communities.

Park has said she had discussed with conglomerate heads in July last year her desire for them to contribute more for culture without elaborating.

South Korean prosecutors raided Samsung Electronics last week as part of the probe over the scandal and whether the company separately gave millions of euros to a company controlled by Choi and her daughter. </s> SEOUL: South Korea's special prosecutors' office said on Monday it was seeking a warrant to arrest the head of Samsung Group, the country's largest conglomerate, accusing him of paying multi-million dollar bribes to a friend of President Park Geun-hye.

Samsung Group chief Jay Y. Lee was questioned for 22 straight hours last week as investigators probed a corruption scandal that resulted in parliament impeaching Park last month.

The special prosecutors' office accused Lee of paying bribes totalling 43 billion won (US$36.42 million) to Choi Soon-sil, a friend of the president who is at the centre of scandal.

Lee, who became the de facto head of the Samsung Group after his father, Lee Kun-hee, suffered a heart attack in 2014, was also accused of embezzlement and perjury in the prosecution's application for an arrest warrant.

Seoul's central district court said a hearing would be held at 10:30 a.m. (0130 GMT) on Wednesday to decide whether to approve the warrant.

"The special prosecutors' office, in making this decision to seek an arrest warrant, determined that while the country's economic conditions are important, upholding justice takes precedence," Lee Kyu-chul, a spokesman for the office, told a media briefing.

Samsung said it could not accept the accusations that Lee paid bribes.

"It is difficult to understand the special prosecutors' decision," it said in an emailed statement.

Prosecutors have been looking into whether Samsung's support for a business and foundations backed by Park's friend Choi may have been connected to the National Pension Service's 2015 decision to support a controversial US$8 billion merger of two Samsung Group affiliates.

NPS chairman Moon Hyung-pyo was indicted on Monday on charges of abuse of power and giving false testimony.

Park remains in office but has been stripped of her powers while the Constitutional Court decides whether to make her the country's first democratically elected leader to be forced from office.

Moon was arrested in December after acknowledging ordering the world's third-largest pension fund to support the US$8 billion merger in 2015 while he was head of the health ministry, which oversees the NPS.

Samsung has acknowledged providing funds to the three institutions but has repeatedly denied accusations of lobbying to push through the merger.

Choi is accused of colluding with Park to pressure big businesses, including Samsung, to contribute to non-profit foundations backing the president's initiatives.

Choi, in detention and on trial on charges of abuse of power and attempted fraud, again denied wrongdoing on Monday in an appearance at the Constitutional Court.

She also denied having any prior knowledge of the Samsung Group's controversial 2015 merger of two affiliates.

"Even if I knew, I could not have passed on any information because I have no knowledge about mergers or hedge funds, anything like that, in the first place," Choi told the court.

South Korea has been gripped by political crisis for months, with Park impeached in December. Park has also denied wrongdoing, though admitted carelessness in her relationship with Choi.

If the impeachment is upheld by the Constitutional Court, an election would be held in two months, with former U.N. Secretary General Ban Ki-moon expected to be a candidate.

Shares in group flagship Samsung Electronics, the world's top maker of smartphones, flatscreen TVs and memory chips, extended losses on Monday afternoon and were down 2.3 percent. </s> SEOUL, Korea, Republic Of _ In a departure from the leniency typically given South Korean big businesses, prosecutors on Monday requested the arrest of the de facto head of Samsung Electronics, the country’s most valuable company, in an influence-peddling scandal that has toppled the country’s president.

Lee Jae-yong, the 48-year-old vice chairman at Samsung Electronics, faces allegations of embezzlement, of lying under oath during a parliamentary hearing and of offering a bribe of 43 billion won ($36 million) to a long-time friend of impeached President Park Geun-hye, according to Lee Kyu-chul, a spokesman for a special prosecutors’ team investigating the political scandal.

It will surprise many that prosecutors requested the arrest of the man who symbolizes the future of South Korea’s most important chaebol, as family-controlled conglomerates are known. Such leaders tend to be treated as vital for the national economy.

Samsung Electronics is South Korea’s most successful company and a source of pride for many who equate its huge global success with national prestige. The company has gone through a rough patch in the past half-year, however, after its latest premium smartphone was found to be prone to catching fire.

Prosecutors understood worries that Lee’s arrest could hurt the economy, but “we believed that it was even more important to carry out justice,” Lee, the spokesman at the special prosecutors’ team, told reporters.

A Seoul court said it will review the prosecutors’ request on Wednesday. The request takes two to three days to review, according to a Seoul court official in charge of arrest warrants who declined to give his name because of office rules.

“The public demand that chaebol, especially Samsung, should not be an exception and that everyone should be equal before laws has become stronger,” said Kim Sang-jo, executive director of Solidarity for Economic Reforms, a private watchdog on big businesses. “Prosecutors and judicial institutions cannot ignore the huge pressure from the public.”

Samsung allegedly donated funds to various entities controlled by Choi Soon-sil, the jailed secretive confidante of the president, including two non-profit foundations and a winter sports centre run by Choi’s niece. This allegedly happened while the company was seeking the government’s help with a leadership succession within the Samsung group to Lee Jae-yong from his father who has been hospitalized for more than two years.

Part of the money given to Choi allegedly was embezzled by the Samsung vice chairman, the spokesman for the prosecutors said. He declined to disclose the exact amount.

Samsung said it has never made donations to win favours.

Prosecutors also indicted ex-health minister Moon Hyung-pyo on Monday on charges he abused his power to compel the national pension fund to support a contentious Samsung merger in 2015.

“We cannot accept the special prosecutors’ argument that there were unlawful favours related to the merger or the leadership succession,” Samsung said in a statement.

The investigation of the Samsung chief could also target Park. Her impeachment is under review by the constitutional Court, which will decide whether to restore her power or force her from office. The prosecutors’ spokesman said investigators had evidence proving that Park shared wealth with Choi and was an accomplice in the Samsung bribery case. They plan to summon Park and will then decide whether to name her as a suspect in the Samsung case, he said.

The national pension fund is the biggest shareholder in Samsung C&T. Its vote in favour of the company’s merger with Cheil Industries helped facilitate Samsung’s leadership succession, allowing Lee Jae-yong to increase his control over Samsung Electronics without spending any of his own money. Smaller shareholders said the merger unfairly benefited Samsung founding family members and hurt minority shareholders.

Samsung sought “unlawful favours” related to “leadership succession,” the prosecutors’ spokesman said.

Samsung Electronics was founded by Lee Jae-yong’s grandfather. The younger Lee has been serving as its de facto head since his father suffered a heart attack in 2014.

Other leaders at Samsung, Hyundai Motor and SK, including Lee’s father Lee Kun-hee, have been convicted in the past for embezzlement or tax evasion. But most avoided imprisonment and later won pardons from presidents who worried that the economy might suffer if they were jailed.

In turn, the businesses often responded to such pardons by announcing big investments or jobs. A former South Korean president pardoned Lee Kun-hee, the ailing Samsung chairman, in 2009, in hopes he would help South Korea win a bid to host the Winter Olympic games.

He was reinstated as a member of the International Olympic Committee after the pardon and South Korea won the bid to host the 2018 Winter Olympics games in Pyeongchang. </s> SEOUL. Atlanta-based Delta Air Lines has purchased a stake in Korean Air’s parent company, helping shore up the family that owns the firm against the building threat from activist shareholders.

Delta acquired a 4.3% stake in Hanjin KAL, it said on Thursday, adding that it could increase the position to 10 per cent “after receiving regulatory approval”.

The stake acquisition comes a year after the two airlines launched a joint venture, providing access to nearly 300 destinations in the US and 80 spots in Asia.

It is a boost for Hanjin KAL’s new chairman Walter Cho and will help the airline “defend its management rights against any attacks of activist hedge funds”, a Korean Air official was quoted as saying by South Korean’s Yonhap News Agency.

They include the Korea Corporate Governance Improvement (KCGI) fund that owns a nearly 16-percent stake in the company and is demanding larger returns and more transparency.

In April, Cho took control of Hanjin KAL from his father Cho Yang-ho, who was kicked off the board by shareholders backed by activist funds just days before he died.

The acquisition sent shares in Hanjin KAL tumbling 15 per cent Friday. Shares in Korean Air, South Korea’s flag carrier, also dropped 2.6 per cent. </s> Seoul - Prosecutors are seeking a warrant to arrest Samsung Group’s Jay Y. Lee for allegations including bribery and embezzlement, a stunning turn for the scion of South Korea’s richest family groomed for decades to take over the company from his father.



Lee, 48, the de facto head of the Samsung Group and vice chairman of Samsung Electronics Co., is accused of participating in payments that Samsung made to a close friend of South Korean President Park Geun-hye in exchange for government support in the company’s succession planning.

A court will still have to determine whether to approve the warrant, which was announced by prosecutors in a briefing on Monday. A hearing is scheduled for Wednesday.

A special prosecutors’ team was established in December to investigate whether Samsung and other chaebol business groups contributed money to Choi Soon-sil, the Park confidant, in exchange for political favors.

President Park has been already impeached and her powers suspended.

Samsung shares fell as much as 3% following the announcement.

The company didn’t immediately have a comment on the arrest warrant.



“We believe that there was an illegal request made by Samsung in facilitating the process of business succession,” Lee Kyu-chul, a spokesman for the prosecutor’s office, said in the briefing.

The arrest warrant would let prosecutors continue their probe while Lee is detained.

Formal charges and an indictment would follow. 



The total amount of bribes and promises made by Samsung is alleged to be about $36m, Lee said.



The investigation jeopardizes Lee’s ability to take over Samsung Group and risks further destabilizing the leadership of South Korea’s largest company.

His father, Chairman Lee Kun-hee, has been hospitalized since suffering a heart attack in 2014.

Samsung is now facing its second crisis in a matter of months, after it was forced to pull the Note 7 smartphone off the market last year because the device was catching fire.



“If Lee is imprisoned, it will damage Samsung’s reputation as well as South Korea’s economy in general,” said Park Sang-in, Professor of Economics, Graduate School of Public Administration at Seoul National University.

Prosecutors will continue to probe three other Samsung executives, including Samsung Corporate Strategy Office Vice Chairman Choi Gee-sung, President Chang Choong-ki and Samsung Electronics President Park Sang-jin without any arrests.



The presidential scandal has gripped South Korea for months, with millions taking to the streets to demand the ouster of President Park.

READ: Samsung to ‘soon’ reveal cause of exploding Note 7s

Lawmakers questioned the heads of nine chaebol to understand whether they were pressured to give money to foundations controlled by Choi.

Then in recent weeks, investigators have focused on Samsung to determine whether the company made payments to gain the backing of Korea’s national pension fund for a controversial merger between Samsung affiliates in 2015.



Prosecutors have homed in on Samsung’s contributions to entities linked to Choi, including a 1 billion-won horse for her daughter and millions of dollars for riding lessons.

The money allegedly was in exchange for helping ensure a smooth transfer of power at Samsung to the younger Lee.



One key question is whether the administration exerted pressure on Korea’s national pension service to support the controversial merger of two Samsung Group companies, Cheil Industries Inc. and Samsung C&T Corp.

The controversial deal was approved in 2015 and made it easier for Lee to gain influence over the sprawling conglomerate.



The merger of Cheil and C&T was opposed by activist investor Paul Elliott Singer and succeeded by a narrow margin, thanks to the support of the NPS, then the biggest shareholder of C&T.

The special prosecutors have previously arrested Moon Hyung-pyo, former chairman of the pension service.

Moon acknowledged that he pressured NPS officials to support the Samsung merger, special prosecutors said last month.

Earlier on Monday, prosecutors separately indicted Moon for abusing his authority and for perjury. </s> SEOUL/CHICAGO (Reuters) - Delta Air Lines bought a small stake in Korean Air Lines Co’s parent company and said it wants to increase it to 10%, giving a boost to the management of South Korea’s top carrier that seeks to thwart a local activist fund’s challenge.

Shares of the parent, Hanjin Kal Corp, tumbled 15 percent on Friday, as Delta’s move dashed investor hopes of a battle to control the family-run group that had driven up shares since the death of patriarch Cho Yang-ho in April.

Korean Air, which has a joint venture with Delta since last year, said on Friday it believes Delta’s 4.3 percent stake buy intends to ensure the ‘stable management” of the company and support for its leadership.

Should the No. 2 U.S. carrier raise its stake to 10% in Hanjin Kal, the airline’s founding family and its allies will have a total stake of 39%, versus the 16% stake held by the activist fund, Korea Corporate Governance Improvement (KCGI).

“Delta played a role as a white knight for Hanjin,” said Choi Nam-gon, an analyst at Yuanta Securities.

“Now it would be impossible for KCGI to take control of the group. The stake buy removes the chance of a management battle at Hanjin Group,” he said.

KCGI said in a statement that if Delta’s investment decision intends to “simply defend the management rights of the controlling family members, this would go against the honor and principles that it has built so far.”

It proposed Delta, backed by U.S. investor Warren Buffett, work together to eliminate inefficiencies and improve management transparency at the Hanjin Group.

Korean Air shares fell 2.6% and its budget affiliate Jin Air Co Ltd rose 0.2% in the wider market that was down 0.3%.

KOREAN AIR SUCCESSOR

Korean Air has been plagued in recent years by a series of scandals involving its founding family members.

In April, the tycoon suddenly died at age 70, just weeks after shareholders decided to end his 27-year tenure on the airline’s board, in a show of growing shareholder activism in Asia’s fourth-biggest economy that has long been dominated by family-owned conglomerates.

The group subsequently appointed his only son Walter Cho, 43, as CEO and chairman, but the company has yet to inform regulators about a definitive succession plan. He and his two sisters have small stakes in Hanjin Kal, in which the late Cho has a 17.8% stake.

Against that backdrop, KCGI raised its stake to nearly 16%, fueling speculation about an impending ownership battle at the conglomerate.

Delta Chief Executive Ed Bastian said earlier this month he had “a lot of confidence” in Walter Cho, noting their friendship had gone back 20 years.

“The investment demonstrates Delta’s commitment to the success of its joint venture with Korean Air,” Delta said in a statement. The venture includes 290 U.S. destinations and over 80 in Asia.

The U.S. airline did not disclose how much it paid for the 4.3% stake. It also did not say who it bought the stake from or when it may raise it to 10 percent.

FILE PHOTO: A Delta Air Lines flight is pushed put of its gate at the airport in Salt Lake City, Utah, U.S., January 12, 2018. REUTERS/Mike Blake/File Photo

Atlanta-based Delta has been growing internationally both through joint ventures - which allow airlines to coordinate fares and schedules while building a presence in new markets - and direct equity investments, which help airlines align their respective strategies.

Delta also owns stakes in Grupo Aeromexico, Air France KLM, China Eastern, Brazil’s Gol and Virgin Atlantic, and has been negotiating a stake in Alitalia.

Shares in Delta closed down 0.7% at $55.97 in New York on Thursday.
South Korea's National Police raid the headquarters of Korean Air as part of an investigation into embezzlement and breach of trust related to misappropriated funds alleged to have been used to fund construction at the residence of Korean Air Chairman Cho Yang-ho (father of Heather Cho, instigator of the "Nut rage incident" in 2014). The company's shares continue to drop.