Controversy erupted after non-government organization (NGO) Finance Watchdog Center filed a complaint with the prosecution against MBK Partners (MBK) chairman Kim Byung-ju on charges of tax evasion over the sale of Orange Life Insurance (the former ING Life Insurance).

“Chairman Kim did not pay any personal income tax when MBK had earned 2.3 trillion won ($2.1 billion) from the acquisition and sale of Orange Life Insurance on the grounds that he, as a U.S. citizen, did not reside in Korea. As this is nothing but a tax evasion, chairman Kim must be subject to strong punishment for that,” the South Korean NGO, which was set up in October to monitor speculative capital and support financial victims, said at a press conference on December 8.

MBK immediately denied the accusation. “The total amount MBK Partners earned from the initial public offering and the stake sale of ING Life Insurance is lower than what the NGO contended,” the largest independent North Asian private firm said, adding that it was simply part of the total earnings after earnings allocated to investors. It also stressed that the firm had paid taxes on earnings from the sale of a stake in ING Life Insurance in accordance with the related laws.

“Chairman Kim and his family moved to the U.S. in 2015 and declared taxes to authorities in both South Korea and the U.S. He paid taxes in the U.S. under the US-South Korea tax treaty,” MBK added.

The PE firm denied that it had manipulated the valuation through a false regulatory filing. While the NGO said the stock price of Orange Life has fallen due to worries over dividend cuts, MBK said that it will maintain high dividend payouts even if the deal has been closed.

MBK said it signed a contract to sell a 59.15% stake in Orange Life to Shinhan Financial Holdings for 47,400 won per share on September 5, 2018 and had not had any influence on the share price of Orange Life from the day of the contract signing to the closing of the deal, because the price had already been set.

The firm also contended that it had nothing to do with the share price movement because the deal was closed on February 1, 2019, 10 days earlier than the date listed by the NGO.

Both parties commented on the investigation into the tax issue by the NTS.

“The NTS started an investigation into MBK Partners’ tax evasion problem in May, but has not yet completed it,” the NGO said.

MBK Partners responded: “We demand that the tax investigation be carried out quickly and thoroughly. We have faithfully responded to regular tax audits and will fulfill our obligation to pay taxes.” (Summary by Capital Connect)