UPDATE 2-S.Korean sect submits to search for founder linked to doomed ferry
* Prosecutors seek father and two sons, whose businesses include ferry firm
* Business patriarch Yoo was also co-founder of Christian sect
* Yoo's whereabouts unknown
* Chief executive of holding company indicted for embezzlement, channeling funds to the Yoo family (Adds indictment of a subsidiary CEO for paying Yoo, paragraphs 13, 14)
By Ju-min Park
ANSEONG/INCHEON, South Korea, May 21 (Reuters) - Hundreds of followers of a religious sect submitted on Wednesday to a search of their rural commune by South Korean authorities seeking the arrest of the head of the family that operated a ferry which capsized last month killing more than 300 people.
Yoo Byung-un is wanted on charges of embezzlement, negligence and tax evasion stemming from a web of business holdings centered around I-One-I, an investment vehicle owned by his sons that ran the shipping company Chonghaejin Marine.
Believed to be in his 70s, Yoo is a co-founder of the Evangelical Baptist Church that runs the sprawling Anseong compound about two hours south of Seoul.
The victims of the ferry disaster were mostly children, and President Park Geu-hye sobbed as she apologised to the grief-stricken nation in a television address on Monday, while her government has vowed to improve national safety standards.
Arrest warrants have been issued for Yoo's two sons, the younger of which is believed to be in the United States.
Prosecutors conceded they had no confirmation of the whereabouts of Yoo or his eldest son, and said they were probably no longer in the Anseong commune but added investigators were also looking for other evidence.
"Again, this investigation is about personal wrongdoings on the part of Yoo Byung-un and sons related to the management of Chonghaejin Marine," Kim Hoe-jong, a senior prosecutor in the case, said in Incheon. "It has nothing to do with religion."
Followers had prevented the authorities, armed with court warrants, from entering the compound earlier by staging a sit-in at the gate. They said they had nothing to hide and have accused the government of religious persecution.
"We will prove that our dear brother Yoo Byung-un is not an evil man and that he has lived as a role model citizen of this country practicing the love of Jesus Christ," Lee Tae-jong, a spokesman for the group, said at the compound gate.
About 1,200 police officers were on site to keep order and helicopters hovered over the Anseong compound as dozens of investigators entered the gate in several vehicles while group followers sang hymns.
Members of the sect grow organic produce and run a freshwater fish farm at Anseong, and Yoo also has a photography workshop there.
Prosecutors have raided a house believed to be Yoo's in Seoul and other locations where he was thought to be holed up evading summons to appear for questioning.
The chief executive of a subsidiary of I-One-I, the holding company controlled by Yoo's sons, was indicted later on Wednesday on charges of embezzling company funds and channelling the money to Yoo and his family.
The indictment of Song Guk-bin, head of Dapanda, which retails health supplements and cosmetics, is part of investigations into businesses owned by the family, none of which are listed, for improper use of company money.
The Sewol ferry, massively overloaded with cargo and without enough water in the ballast tanks to keep steady, capsized on April 16 during a routine journey from the mainland port of Incheon to the holiday island of Jeju.
Most of the victims were children and their teachers on a field trip from a high school on the outskirts of Seoul.
All 15 surviving crew members were indicted last week, including the captain and three senior crew members on homicide charges. Nine others were indicted for negligence and two on a lesser charge of abandoning the vessel.
The prosecution said the ferry was structurally defective after a remodelling to add capacity and was massively overloaded with cargo.
The elder Yoo was once jailed for fraud in the 1990s but was cleared of complicity in the suicides of 32 workers of a company linked to his church in 1987. (Writing by Jack Kim; Editing by Simon Cameron-Moore)
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