[Edaily Reporter BAEK JU-A ] Prosecutors have indicted the chairman and his wife of the DEUTSCH MOTORS INC.(067990) Group on charges of exchanging fraudulent tax invoices while funneling exhibition hall and interior construction projects worth 100 billion won to shell companies.

The Tax Crime Investigation Division of the Seoul Central District Prosecutors’ Office (headed by Chief Prosecutor Yong Tae-ho) announced on the 22nd that it had indicted Mr. A, chairman of DEUTSCH MOTORS INC., and his spouse, Ms. B, without detention on charges including the issuance of false tax invoices under the Act on the Aggravated Punishment of Specific Crimes.

According to the prosecution, the couple is accused of establishing three shell companies to monopolize profits from exhibition hall and interior construction projects commissioned by the group, and of exchanging false tax invoices while funneling a total of 107.9 billion won worth of construction work to these companies over approximately four years, from November 2017 to October 2021.

The prosecution believes that while one construction firm—actually owned by Mr. B under a nominee’s name—carried out all the work, the pair established two additional shell companies to make it appear as though the contracts had been awarded through competitive bidding. Some projects were processed as if they had been awarded to and carried out by the shell companies; in this process, the investigation found that Mr. A issued or received false tax invoices worth approximately 6.2 billion won, while Mr. B issued or received false tax invoices worth approximately 20.4 billion won.

Mr. B is also accused of evading a total of 650 million won in taxes. Prosecutors stated that Mr. B evaded approximately 190 million won in gift tax by placing the shares of three companies in the names of acquaintances of the couple through nominee arrangements, in order to avoid gift tax on transactions between related parties. In addition, prosecutors believe Mr. B evaded approximately 460 million won in comprehensive income tax by receiving corporate dividends paid to nominee shareholders back in cash to conceal his income.

The prosecution stated, “We will spare no effort in pursuing these charges to ensure that offenders who undermine the tax system and threaten national finances receive punishment commensurate with their crimes.”

Meanwhile, DEUTSCH MOTORS INC. issued a statement on the 23rd, stating, “The construction projects mentioned in the reports were actual transactions carried out to build showrooms and service centers nationwide,” and added, “The reality of the projects and the appropriateness of the transaction prices were confirmed during the previous tax audit by the National Tax Service.” The company further explained that DEUTSCH MOTORS INC. itself was not the subject of this prosecution investigation.

The company maintains that this matter pertains to personal tax issues—such as comprehensive income tax and gift tax—involving former Chairman Kwon Oh-soo. DEUTSCH MOTORS INC. stated, “This has no impact on the company’s business operations or finances, nor is there any possibility of future losses to the company,” and added that it will clarify the factual truth through individual litigation.