S.Korea financial watchdog starts Samsung probe

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SEOUL, Nov 20 (Reuters) South Korea's financial watchdog said on Tuesday it was checking whether Samsung Group used employee accounts to stash slush funds, the latest move in a growing controversy involving the country's largest conglomerate.

The scandal was triggered earlier this month by a whistleblowing former Samsung lawyer when he accused the group of institutionalised corruption to win favours from officials.

Samsung has denied the allegations by the former head of a key legal division at the group, Kim Yong-cheol.

Kim has said that most Samsung affiliates held slush funds worth billions of won, and that most high-ranking executives had their accounts stuffed with cash to be used for regular bribes.

Financial Supervisory Service (FSS) Deputy Governor Kim Dae-pyung told reporters that an internal investigation by Woori Bank into so-called borrowed name accounts had not gone far enough.

It is illegal in South Korea for anyone to use the accounts of someone else unless the account holders formally advise the bank.

''The persons concerned had not made full statements. We viewed that as insufficient and judged that an additional probe was necessary,'' he said, asked by a reporter about the examination of bank accounts possibly used by Samsung.

On Monday, a former legal advisor to President Roh Moo-hyun issued a statement saying he had returned a 5 million won (,400) gift from a Samsung Electronics <005930.KS> executive in 2004.

A Samsung Electronics spokesman declined to comment.

The newly-named prosecutor in charge of the probe into the Samsung allegations told reporters he would focus on allegations surrounding slush funds, the lobbying of MPs and officials and the question of inheritance at the family-controlled company.

''We are thinking about forming three teams to handle each of the allegations,'' he was quoted by Yonhap news agency as saying, adding his team would not spare anyone from its probes.

Prosecutors had been among those alleged to have taken bribes from Samsung.

REUTERS BJR ht1437

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