Samsung’s Sale of Copper Firm Shares Probed

Prosecutors yesterday began probing Samsung Corp. on the allegation that it raised slush funds by selling at rock-bottom prices shares of the world’s 10th-largest copper miner and refiner Kazakhmys, which the Korean company had operated.

The independent investigation team asked the National Tax Service to present the tax records of former Kazakhmys President Cha Yong-gyu.

Cha, who had headed Samsung Corp.’s branch in Almaty, Kazakhstan, bought the shares sold by Samsung Corp. and Samsung Hong Kong via a paper company. He later earned more than one trillion won after Kazakhmys was listed on the London Stock Exchange in October 2005.

Helped by the fortune he built through the sale of the shares, Cha was ranked as the world’s 754th richest person by Forbes magazine in March last year.

A prosecutor said attention was paid to why Samsung Corp. and Samsung Hong Kong sold 24.77 percent of Kazakhmys at a low price, how Cha bought the shares and how the firm was listed on the London stock market.

Kazakhmys sold shares owned by both Samsung affiliates to Cha two months after the copper firm announced that it would be listed on the London Stock Exchange in June 2004.

The civic group Solidarity for Economic Forum said Cha paid 100 million U.S. dollars for all the shares at 19,051 won each, less than half of the net asset value (49,617 won) of a Kazakhmys share in late 2003 and below the average transaction price (30,000 won) of a share in the Kazak stock market in the first half of 2004.

Samsung Corp. suffered losses of 21.2 billion won and Samsung Hong Kong 119.1 billion won from their sales of Kazakhmys shares.

A Samsung source said, “Some have doubts given that Cha earned a pile of money after Kazakhmys was listed earlier than expected. However, we believe Samsung was really lucky to sell Kazakhmys shares without sustaining damage.”

Investigators also asked for tax payment records of five Samsung subsidiaries including Samsung Techwin (formerly Samsung Airlines), and added three more accountants to the probe team.

To investigate the conglomerate’s slush fund scandal, prosecutors summoned Samsung Electronics Vice President Lee Gi-tae, Samsung Life Insurance President Lee Su-chang and Samsung Securities President Bae Ho-won. Samsung Card Executive Director Shin Eung-hwan was also called in over his indictment for his role in the “e-Samsung” project.

dnsp@donga.com verso@donga.com