The atmosphere at the National Agricultural Cooperative Federation (NACF) has been tense lately. The National Tax Service has launched an irregular tax audit, or special tax audit. Attention is increasingly focused on alleged misconduct involving Chairman Kang Ho-dong and other senior executives. Before the tax probe, a government joint special audit team had already asked the Police to investigate allegations of bribery and the misuse of public funds surrounding Kang.
This broad pressure from the authorities could affect NACF's overall management. That is why industry watchers say the move may reflect the government's push for governance reform.
According to NACF and financial industry sources on the 8th, Investigation Bureau 4 of the Seoul Regional Tax Office began a tax audit of NACF headquarters on the 29th of last month without prior notice and secured accounting-related documents. About 130 people were deployed to collect the materials. Investigation Bureau 4 is often called the 'grim reaper of the business world' and mainly handles irregular and planned tax audits targeting suspected corporate tax evasion. It is known to move when specific signs of wrongdoing are found, such as tax evasion, slush funds, breach of trust, embezzlement, or internal favoritism in contract awards.
NACF completed a regular tax audit by the National Tax Service in November 2023. This means the latest audit came within three years. In general, regular tax audits by the National Tax Service are conducted every four to five years, and companies are notified 20 days in advance so they can choose the timing of the audit within a three-month window. That is why many in the industry believe this latest audit is likely a special tax audit. In particular, observers expect the authorities to focus on alleged misconduct involving Chairman Kang and his close aides. They say the probe is likely linked to the government-led special audit of NACF that was carried out earlier.
In January, the government formed a joint special audit team involving the Office for Government Policy Coordination, the Ministry of Agriculture, Food and Rural Affairs (MAFRA), the Financial Services Commission (FSC), and the Financial Supervisory Service to root out misconduct related to NACF and improve transparency. The team conducted a special audit of NACF and the NACF Foundation. In March, it asked the Police to investigate 14 cases with a high likelihood of legal violations, including misuse of public funds, preferential loans and contracts, and accounting fraud.
Kang is suspected of violating the anti-graft law by providing gifts to cooperative heads, members, and executives who helped his election through the NACF Foundation's project funds, via a foundation official, and by receiving a 10-don gold key, worth about 5.8 million won at the time, to mark the first anniversary of his inauguration. Separately from the audit, he is also suspected of receiving more than 100 million won in cash and valuables from the head of a service contractor that did business with an NACF affiliate around the January 2024 election period for the NACF chairman. The National Tax Service is expected to closely examine the flow of funds related to each allegation during the special audit. Industry sources say the government is also pushing to reform NACF's governance, so the audit may reflect an attempt to gain the upper hand in the ongoing struggle over supervisory authority.
NACF acknowledged that the latest tax probe is a special audit, but it is cautioning against overinterpretation. An NACF official said, "We do not know the purpose or scope of the special tax audit," and added, "We are cooperating fully with the investigation."
Meanwhile, NACF said it has drawn up a plan for a 'major transformation' centered on sweeping organizational reform and will begin implementing it across the company. The plan focuses on reforming headquarters operations and strengthening support for farmers.
Kim Se-hyung, Sportschosun
