Is tax probe really a routine audit?

Goldman Sachs Group has been under investigation by South Korean tax authorities for sixmonths over its investments in Jinro, local media reported. The National Tax Service began investigating Goldman in November over allegations it failed to pay taxes on about 1 trillion won ($1.1 billion) in profit from the sale of Jinro in 2005, according to the newspaper.

However, Goldman Sachs Group has said that a study of its business operations in South Korea by the nation's tax authorities is only a routine audit. “Today's newspaper articles which refer to a NTS tax investigation of Goldman Sachs unfortunately mischaracterize what is a routine tax audit of the firm's businesses in Korea,'' spokesman Christopher Jun said today.

Goldman and other creditors of Jinro won a legal bid in April 2004 to force the liquor maker's sale to help them recoup 3 trillion won ($3.2 billion) of debt. Hite Brewery, South Korea's largest beer maker, agreed in June 2005 to acquire Jinro for 3.4 trillion won, most of which went to the creditors.

Given that Goldman Sachs’ clean track record and trusted brand name, should we take their word that the investigation in South Korea is just a mere routine audit? Will the air of suspicion, which might very well spark a downfall of share prices, clear soon?