Go to contents

SK Owner Pocketed Tens of Billions Illegally Via Share-Swapping

SK Owner Pocketed Tens of Billions Illegally Via Share-Swapping

Posted February. 19, 2003 22:29,   


The Criminal Division 9 of the Seoul District Public Prosecutors` Office is reportedly considering indicting SK group owner Choi Tae-won without bail. The DA`s Office suspects that Choi has caused damages to SK affiliates in the amount of tens of billions of won (or approximately, tens of millions of dollar). Choi, according to the DA`s Office, mobilized SK affiliates like SK C&C last March for swapping shares of Walker Hill Hotel with those of SK, Inc. in an effort to maintain his control over all SK affiliates.

Yesterday, the prosecution questioned SK executives including SK Corporation`s vice Chairman Hwang Doo-yul, SK Global`s CEO Kim Seung-chung and SK Securities` CEO Kim Woo-pyung. The DA`s Office is trying to find out exactly how the illegal share swapping took place and who were involved. In addition, it is trying to figure out the nature and content of the secret deal made by and between SK Securities and JP Morgan.

The DA`s Office is endeavoring to compute the market value of the swapped Walker Hill Hotel`s shares. To secure more material documentation and data, it searched on the SK`s archive in Samsung Dong, Seoul and other affiliates` headquarters including SK C&C.

A secret internal report, which the prosecutor has secured, reportedly contains a contingency plan for strengthening Choi`s grip over the SK group. The plan warns that a legal problem may arise out of swapping shares that are not traded in the market after artificially raising their value.

The report allegedly proposed three ways to protect Choi`s control from getting weakened due to the expected implementation of a new law. Under the new law, which was taken into effect last April, a coporation owner is not allowed to invest exceeding certain portion of the total capital of another company. One of the proposals suggested that Choi swapped SK Inc. shares with those of Walker Hill Hotel, says the DA`s Office.

The DA`s Office believes that the report will sustain them through the upcoming legal battle, eventually proving Choi`s guilt. It has reached a temporary conclusion that Choi illegally pocketed tens of billions of won in profit through the swapping.

Sang-Rok Lee Tae-Hoon Lee myzodan@donga.com jefflee@donga.com