[Alpha Biz= Paul Lee] The Korea Fair Trade Commission (KFTC) has launched an on-site investigation into HL Group—including HL Holdings, HL Wiko, HL D&I, and Lotus Private Equity (PE), a fund owned by the children of Chairman Chung Mong-won—following allegations first raised in an exclusive report by Kukmin Ilbo. This marks the first formal investigative action by authorities since concerns surfaced approximately one year ago that internal HL Group funds may have been funneled into a private equity vehicle controlled by the owner family.
According to the Kukmin Ilbo exclusive, Lotus PE is wholly owned by Chairman Chung’s two daughters. Controversy intensified after it was revealed that HL Holdings, through its subsidiaries, had contributed approximately KRW 217 billion to funds in which Lotus PE participated. Despite being established in November 2020 with initial capital of just KRW 500 million, Lotus PE expanded rapidly on the back of HL Holdings’ support. As of year-end 2023, the firm reportedly managed five funds, 58% of which were backed by HL Holdings.
The delayed public recognition of Lotus PE as a “family-controlled” entity is attributed to HL Holdings’ method of channeling investments through unlisted subsidiaries HL Wiko and HL D&I, enabling the group to avoid mandatory disclosure requirements. HL Wiko, despite posting a loss in 2023, is reported to have secured capital through HL Holdings’ paid-in capital increases and borrowings, which were subsequently invested in Lotus PE-managed funds. Industry analysts argue that a private equity fund wholly owned by the controlling family’s children appears to have functioned as a de facto succession-financing vehicle, mirroring indirect inheritance structures previously observed among major conglomerates.
HL Group has maintained that the investment structure was unavoidable under existing legal frameworks and emphasized that the contributions were unrelated to succession planning, adding that no further investments are planned. However, with the KFTC moving forward with an on-site investigation, regulators are expected to examine whether HL Group’s indirect investment scheme constitutes unfair intra-group support and whether it ultimately facilitated succession for the controlling family. The investigation is also likely to reignite scrutiny over HL Group’s governance transparency.
The KFTC has recently prioritized stronger oversight of internal transactions and unfair support within large business groups, expanding its review of private benefit structures and increasing enforcement intensity.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
