South Korea’s antitrust watchdog has reported Naver founder Lee Hae-jin to prosecutors on charges of deliberately withholding information on some Naver affiliates to avoid designation as the portal giant’s legal representative.

Naver denied the claims, saying the omission was a simple mistake.

The Fair Trade Commission (FTC) accused Lee, who stepped down as chairman of Naver’s board in February 2018 but remains its global investment officer (GIO), of failing to submit information on 20 affiliates owned by himself and his relatives in regulatory filings in 2015.

Every year, the FTC requires large companies with assets of more than 5 trillion won ($4.2 billion) to disclose information on the status of affiliates, relatives, shareholders and executives to monitor unfair trade practices. The watch list was installed in an effort to rein in the excesses of the country’s powerful conglomerates.

Naver joined the watch list in 2017, with Lee named the legal representative. But even in 2015, when its assets topped 3.5 trillion won, the company was required to make the same regulatory filings to the FTC as a candidate. The FTC accused Lee of trying to withhold information on companies owned by himself and relatives worth hundreds of millions of dollars to avoid being designated the legal representative, which would put him under increased scrutiny.

Naver had opposed to the FTC’s naming of Lee as its legal head. It has maintained that unlike other family-owned conglomerates, Naver is a company without a clear leader as Lee does not wield effective control and holds less than 3 percent in Naver shares.

But the FTC argued that Lee still holds considerable sway in board decisions and that his 3 percent ownership is meaningful given that more than half of Naver’s shareholders are those with less than a 1 percent stake.

The omitted companies are said to be Zium, a management consulting firm wholly owned by Lee, and Hwaeum, another Naver affiliate in which Lee’s cousin holds a 50 percent stake. Other omissions include YTN Plus, which is 50 percent owned by Naver, and Line Friends, wholly owned by Naver’s affiliate Line. The remaining 16 companies are owned by executives of non-profit organizations wholly owned by Naver.

Naver said the omissions were a simple mistake and were not made with intent.

“The filings in 2015 were carried out in summary form as Naver was not yet put on the watch list,” said a Naver official. The source added that Line Friends was founded in January 2015 and that it was left out because the reports submitted in 2015 were based on 2014.

Some say the FTC’s latest actions are unduly harsh, and that the case is not serious enough to warrant a report to prosecution. Omissions were of small companies and took place during preliminary filings ahead of the official designation. They point out that a similar case in the past would have ended with a warning.

Naver shares closed Monday up 0.8 percent at 188,000 won.

By Oh Dae-seok, Moon Jae-yong and Kim Hyo-jin

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