The head of Myeongryundang, the headquarters of the restaurant franchise Myeongnyun Jinsa Galbi, who is accused of making illegal high-interest loans to franchisees, has been handed over to prosecutors.
The Seoul Municipal Special Judicial Police Bureau for Civil Affairs said on the 23rd that it referred the head of the restaurant franchise headquarters, identified as A, to the competent prosecutors' office on the 14th on suspicion of violating the Lending Business Act. This is the first time a local government has referred a franchise headquarters chief to prosecutors on suspicion of illegal lending business.
From 2023 to the end of last year, Myeongryundang is suspected of borrowing about 79 billion won from a bank at low annual rates in the 3% to 4% range and then, through 12 subsidiary lending companies, lending money to franchisees who lacked start-up funds.
Myeongryundang first lent 79.15 billion won to its subsidiary, identified as B, at an annual rate of 4.6%. B then lent 80.11 billion won to 12 lending companies at an annual rate of 4.6%, continuing the illegal lend scheme.
It was confirmed that from Nov. 2021 to the end of 2023, the lending companies lent 83.136 billion won to franchisees at high annual rates of 12% to 15%. Through this, the headquarters took in a total of 15.5 billion won, including 9.9 billion won in principal repayments and 5.6 billion won in interest.
The investigation found that the representatives of the 12 lending companies were former and current employees of the headquarters, employees of partner companies, and the representative's wife. Except for some companies, the shareholders of these lending companies were found to be 100% owned by the headquarters chief in terms of equity.
If a franchise headquarters engages in unregistered illegal lending operations by using subsidiaries to obtain profits related to lending funds without registering as a lending business, it can face up to 10 years in prison or a fine of up to 500 million won.