Kakao Opens Deep Investigation on SM Entertainment, KakaoBank, Kakao Mobility

Kakao Corporation reportedly launched a comprehensive investigation on its major affiliates, including SM Entertainment Co. Ltd., KakaoBank, and Kakao Mobility. The probe will also include digital forensics that will check the computers of some senior executives of SM Entertainment to see if they are involved in any case of fraud.

As per Pulse News, the Kakao Group started the probe not long ago, and it is a company-wide investigation of its central business units. The audit is part of a process for the company to pinpoint if employees violated the company rules and policies. The company also takes this measure in response to calls for better corporate governance.

Focus of the Investigation

Kakao Corp. said that in addition to its committee, the independent regulator, The Compliance and Trust Committee, is also participating in the probe. Business insiders familiar with the matter shared that the company’s ongoing audits are focused on its largest affiliates, particularly SM Entertainment.

It was further disclosed that the regulators already conducted a forensic investigation of computers belonging to Jang Chul Hyuk, the current chief executive officer of the entertainment agency founded by Lee Soo Man in 1995. They also checked the computers of Lee Sung Soo, head of artists and repertoire (A&R), and Tak Young Joon, the firm’s chief operating officer.

The regulators also investigated other firm executives. All the audits on SME executives were said to have occurred earlier this month.

“In the investigation conducted by an independent law firm, investigators looked into investment proposals made by SM Entertainment without prior consultation with Kakao to determine whether the activities were legitimate,” an official of Kakao said in a statement.

Special Target of the Probe

The Korea Economic Daily reported that Kakao confirmed that a law firm was also contracted to review SM Entertainment’s financial statements thoroughly, as requested by the board of directors’ audit committee. The main target is SME’s investments, which were suspected to have been made without consulting Kakao. The tech firm acquired a sizeable controlling stake in the entertainment firm last year worth KRW1.2 trillion or $900 million.

Photo by: Kakao Newsroom