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The Appeals Court Upholds the Conviction of Samsung Executives

The Appeals Court Upholds the Conviction of Samsung Executives

Posted May. 30, 2007 03:06,   


An appeals court on Tuesday upheld the conviction of two Samsung Group executives, Heo Tae-hak (63) and Park Ro-bin (61), who were found guilty of selling securities at below market value, an attempt that critics say was intended to transfer the control of the group from father to son.

The fifth Criminal Division Criminal of the Seoul High Court, presided by judge Cho Hee-dae, found the executives guilty of causing losses to the company by selling convertible bonds of Everland, one of the largest amusement parks in Korea run by Samsung Group, at a below market value price. They were sentenced to three years in prison, five years of probation, and a three billion won fine.

The court made no ruling on whether the issuance of convertible bonds at a discounted price was conspired by the group as a whole including Samsung Chairman Lee Kun-hee.

Yet, it admitted that the move was aimed at bequeathing the control of the conglomerate, confirming the fact that selling convertible bonds at an extremely low price enabled them to give the bonds to Lee’s children including his eldest son, Lee Jae-yong.

In response, Samsung said it would immediately appeal to the Supreme Court, heralding a heated debate over it.

As the appellate court upheld the lower court’s ruling, prosecutors plan to subpoena Chairman Lee. However, Samsung said, “As the court delayed the ruling on the conspiracy charge, it will be difficult to subpoena Chairman Lee for investigation.”

The court ruled, “The lowest possible price of Everland shares is more than 14,825 won. Mr. Heo and Mr. Park caused losses of at least 8.9 billion won to the company by conspiring to issue convertible bonds at 7,700 won per share.”

While the lower court charged them of breaching their official duty, mentioning the impossibility of counting losses, the appeals court counted the losses as above and charged them with embezzlement, which allows the court to punish criminals in proportion to the losses.

Prosecutors argued the losses amounted to at least 96.9 billion won, but the court did not accept all of the prosecutors’ argument.

In addition, the court said, “Mr. Heo and Mr. Park caused losses to the company by plotting tacitly to set share prices at a remarkably low price, allowing Lee’s elder son to gain control of the group. They did this intentionally, acknowledging they were embezzling, and even if it they did not, they had a reckless intention.”

Heo and Park decided to issue convertible bonds in the way of offering to shareholders at the board of directors’ meeting in October 1996. However, as shareholders lost their rights, they gave Chairman Lee’s four children 1,254,777 shares in the name of a third party. Heo and Park were accused of incurring losses to the company.

On Tuesday afternoon, in a statement titled, “The Position of the Defendants and Lawyers,” Samsung announced, “We hoped that all accusations would be nullified, but it did not turned out in the way we hoped, and we regret this. We are sure that the defendants will be acquitted in the Supreme Court as the appeals court ruling is problematic.”

wing@donga.com higgledy@donga.com