By Kim Tong-hyung
Staff Reporter
Prosecutors are tracing the bank accounts of Samsung Group chairman Lee Kun-hee’s four children, including Samsung Electronics vice president Lee Jae-yong, to confirm allegations that the conglomerate’s wealth was unlawfully transferred to the founding family.
The Seoul Central District Court earlier this month found two Samsung executives guilty for selling convertible bonds of Samsung Everland, the group’s de facto holding company and the country’s largest amusement park operator, from chairman Lee to his only son Jae-yong and three daughters at well below-market prices in 1996.
According to prosecutors, Samsung Everland sold the convertible bonds for 7,700 won per share although the amusement park’s stock was being traded at about 85,000 won per share. The transaction incurred an estimated 97-billion-won loss for the unlisted theme park operator.
The court sentenced Samsung Everland chief executive Park Ro-bin and his predecessor Huh Tae-hak to suspended jail terms of two years and three years, respectively.
Samsung appealed the ruling to the Seoul High Court recently, setting off what could be a heated showdown with law enforcement authorities.
Prosecutors are focusing on the financial transactions surrounding December 1996, when the younger Lee and his sisters converted the bonds to secure 1.25 million shares of Samsung Everland’s stocks, putting 64 percent of the company under their ownership. The investigators will also trace the source of the 9.6 billion won ($9.2 million) used to acquire the convertible bonds.
There is a possibility that chairman Lee and his family members could eventually be called in for questioning. However, both Lee and his son were not included when law enforcement authorities slapped travel bans on eight Samsung executives earlier this month to question their involvement in the illicit stock transactions.
Chairman Lee, 63, is currently in the United States undergoing post-operative treatment for lung cancer and has schedule no return date.
Prosecutors are trying to confirm whether chairman Lee directed the stock transactions in an attempt to avoid paying inheritance taxes when transferring the group’s wealth to his children.
Critics accuse Samsung’s founding family of solidifying its dominant ownership within the conglomerate through illicit stock transactions and cross-ownership between affiliate companies.
Samsung Everland officials have been insisting that it issued the convertible bonds in 1996 to improve the company’s financial structure by reducing debt. Among the main points of the investigation, therefore, is whether prosecutors can prove that the transactions between chairman Lee and his children had a negative financial impact on Samsung Everland.
Observers believe that the recent scandal surrounding Samsung has an explosive potential, forever tarnishing the image of Korea’s largest conglomerate, should investigators find credible evidence pointing to the conspiratorial involvement of chairman Lee and other executives in unlawfully transferring the group’s wealth to the founding family.
Separately, the civic group People’s Solidarity for Participatory Democracy (PSPD) filed a lawsuit yesterday against chairman Lee’s son Jae-yong and top executives at nine Samsung affiliates over accusations of illicit stock trading in 2001.
The nine affiliates include Cheil Communications, Samsung SDI, Samsung SDS, Samsung S-1, Samsung Electro-mechanics, Samsung Card, Samsung Securities, Samsung Capital and Samsung Venture Investment. According to the PSPD, the affiliate companies acquired the younger’ Lee stocks in 14 Internet companies he established in 2000, intending to reduce his loses in the struggling businesses.
The civic group claimed that the nine affiliate companies combined to sustain a loss of 38 billion won as a result.
thkim@koreatimes.co.kr
