99.7 Billion Won Compensation for Small Shareholders

The executives of Samsung Electronics (SE), who damaged the company by selling stocks to affiliated companies at a low price and taking over an insolvent enterprise, were sentenced to compensate for 90.2 billion won to shareholders.

Samsung Group Chairman Lee Kun-Hee was also ordered to return 7.5 billion won, which was used to bribe the former President, Roh Tae-Woo.

Suwon District Court civil affairs division 7 (The Chief Justice, Kim Chang-Suk senior judge) judged on 27th that, "The chairman Lee Kun-Hee and 9 former or incumbent executives should pay for 97.7 billion and 80 million won." as a penalty for the mismanagement, which was filed by 22 small shareholders of Samsung Electronics, including Park Won-Soon (45,co-head of People`s Solidarity for Participatory Democracy), against 10 former and current executives, including the chairman Lee, Kim Kwang-Ho (61) on October 20th, 1998.

The court judged, "Chairman Lee injured the SE by giving 7.5 billion won to the former president, Rho Tae-Woo, as a bribe from March 1988 till August 1992. Mr. Lee is ordered to compensate for the 7.5 billion won."

And the court added, "The SE executives board decided to purchase the insolvent company, Icheon Electricity in March 1997 in one hour meeting without due consideration. The company went into liquidation in no less than 2 years, accruing the 190.4 billion won loss. Therefore the executives should compensate for the loss of 27.6 billion and 20 million won."

And the court stated, "When the SE sold the 20 million shares of Samsung General Chemicals, whose face price was 10,000 won, at the price of 2.600 won, the actual price of a stock was 5.733 won. So the difference of 62.6 billion and 60 million won should be compensated."

But the court didn`t recognize the complaints that the SE had in-house trading by putting ads on JungAng ilbo at a high price, and paid too much security money and monthly rent to Samsung Corporation and Samsung Heave Industries, judging that "there is no evidence that the executives were directly involved in the business. "

Small shareholders including Mr. Park filed a lawsuit for the loss amounted 351.1 billion won against 11 executives of former or current on October 20th, 1998, asserting that in-house trading of SE damaged their interests.

The executives of the SE said, "The judgment does not make sense. We will appeal to a higher court."

A high official of the SE said, "I cannot understand why the court judged huge amount of compensation for what executives decided by the normal judgment of management. I`m worried that they would shrink by the decision making process."

This lawsuit was the second case brought on by small shareholders against the executives of a joint-stock corporation since the lawsuit against Lee Chul-Soo, the president of Korea First Bank, and 4 other executives for the illegal loan to Hanbo Steel in 1997.

bibulus@donga.com