Go to contents

Court Ruling Will Have Little Impact on Samsung Management Rights

Court Ruling Will Have Little Impact on Samsung Management Rights

Posted October. 05, 2005 07:18,   


A court has decided that in the case filed by the People’s Solidarity for Participatory Democracy about the acquisition of Samsung Everland convertible bonds (CBs). Shareholders who allocated CBs to Lee Jae-yong, managing director of Samsung Electronics and the only son of Samsung Group Chairman Lee Kun-hee, for a low price, were guilty of malpractice.

With the ruling, the court effectively acknowledged the unfairness of the expedient inheritance of the stocks of Everland, the holding company of the Samsung Group.

However, as the court did not nullify the issuance of CBs by Everland, it is expected that the influence of the ruling on the succession structure of the Samsung Group’s management rights from Chairman Lee to Lee Jae-yong will be negligible.

With the statue of limitations for the case expired, the prosecution announced it would begin additional investigations into whether the other 31 accused, including Chairman Lee, are involved in the malpractice.

On October 4, Hur Tae-hak, former president of Everland, was sentenced to three years in jail with a stay of execution for five years, while Park No-bin, the former managing director of the company, was sentenced to two years in jail with a stay for three years by the Seoul District Court. Hur was accused of doing financial damage to the company by selling the company’s CBs to four siblings, including Lee Jae-yong, for a low price.

The court said that it applied the criminal charge of malpractice, instead of the charge applied when the amount of damage inflicted on a company exceeds 500 million won, since it failed to identify the price of the CB in question.

The court said, “It seems that the accused pretended to allot Everland CBs first to existing shareholders, but actually allocated them to Lee Jae-yong and his siblings for the purpose of handing over the management rights of the Samsung Group after the shareholders gave up acquisition of the CBs.”

Hur was accused without detention in December 2003 on charges of inflicting financial damage of 96.9 billion won on the company. He was reportedly allocated about 1.25 million shares of Everland CBs, which are priced at 85,000 won per share, for 7,700 won per share to Lee Jae-yong and his siblings in November 1996, after existing shareholders gave up their rights to the acquisition of the CBs.

Meanwhile, the Supreme Prosecutors’ Office launched a re-investigation into whether Samsung Group officials are involved in the case that day.

The Samsung Group said right after the ruling was released that it would decide whether to lodge an appeal after consultation with its lawyers.