CJ Group's slush fund predicament faced new challenges on Thursday after a former National Tax Service chief admitted to accepting gifts from the conglomerate.

He denied, however, that they were in exchange of any favors, prosecution sources said on Thursday.

Jeon Goon-pyo, 59, appeared before prosecutors this day to face questioning over allegations that he accepted kickbacks from CJ in exchange for favors during a tax audit into the local food and entertainment conglomerate in 2006.

Jeon is under suspicion of taking $300,000 in U.S. bills and high-end watches from CJ in July 2006 just after he was named the commissioner of the National Tax Service (NTS).

According to the sources, Jeon acknowledged in writing that he received cash and watches, but claimed that he thought the gifts were only to congratulate him on his inauguration as the NTS chief.

Jeon had flatly denied all allegations before Thursday.

After indicting CJ Group Chairman Lee Jay-hyun of embezzlement and offshore tax evasion charges in a separate corruption case earlier this month, prosecutors have expanded their probe into the conglomerate's alleged illegal lobbying for tax breaks.

During the audit into CJ Group in 2006, tax authorities obtained evidence that the group and its chairman Lee allegedly dodged some 356 billion won ($319 million) in corporate and income taxes. However, the NTS neither collected nor levied any fines on the family-run conglomerate.

The prosecution office suspects that CJ Group officials illegally lobbied the former top tax officials so that the conglomerate could reduce its tax burden or even avoid paying the massive amount of taxes altogether.

During prosecution questioning, CJ Group officials alleged that they gave the money and expensive designer watches to Heo Byung-ik, the NTS deputy commissioner at the time, asking him to relay them to Jeon.

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

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

It is not the first time that the former No.1 tax official has undergone a prosecution probe over similar graft allegations.

In 2011, Jeon was accused of receiving a high-priced painting from the agency's No. 2 official in exchange for securing the top post before he was officially given the job.



From news reports