State prosecutors on Tuesday raided the residence of a former chief of the national tax agency and its Seoul regional office as part of their investigation into an alleged bribery exchange between CJ Group and former top tax officials.

After indicting CJ Group Chairman Lee Jay-hyun of embezzlement and offshore tax evasion charges, prosecutors have been expanding their probe into suspicions that the local food and entertainment conglomerate provided bribes to former chief Jeon Gun-pyo and former deputy chief Heo Byung-ik of the National Tax Service (NTS) in return for favors during a 2006 tax audit into the group.

The NTS in 2006 neither collected nor levied any fines on the family-run conglomerate, though tax authorities obtained evidence that the group and Lee dodged some 356 billion won (US$319 million) in corporate and income taxes, according to the prosecution.

The prosecution office suspects that CJ Group officials illegally lobbied the former tax officials so that the conglomerate could avoid paying massive taxes.

After raiding the Seoul regional office of the NTS in central Seoul, a team of prosecutors and investigators of the Seoul Central District Prosecutors' Office obtained records of the tax audit into Lee.

The disgraced chairman has been accused of transferring wealth to his two children by purchasing bonds overseas without paying gift taxes here, according to prosecutors.

The prosecution office also ransacked Jeon's home in southern Seoul to secure financial documents and data deemed helpful in proving that the former NTS commissioner received bribes from CJ Group in late 2006.

Prosecutors suspect that Lee tried to lobby Jeon, who headed the NTS from July 2006 to November 2007, through Jeon's then-deputy Heo.

CJ Group officials alleged that they gave US$300,000 in U.S. bills and high-end watches to Heo asking him to relay them to Jeon, who had just been named the head of the tax agency.

Heo, who was arrested pending trial on Saturday, admitted to taking the money but claimed that he had handed over the gifts and the money to Jeon, according to prosecutors.

Accusations have also risen that Jeon, who is banned from traveling while the probe is ongoing, received expensive watches at a Seoul hotel as an inauguration gift from Lee.

Jeon, meanwhile, has flatly denied such allegations, saying that he will explain everything during a prosecution probe.

Lee has been detained pending trial since July 1 on charges of dodging some 70 billion won in taxes by stashing secret funds and misappropriating 100 billion won in company money.

The country's 10th-richest man is also suspected of inflicting financial losses worth 35 billion won on the group by fraudulently purchasing two buildings in Tokyo. (Yonhap News)