Samsung Chairman promised “something worthwhile”, but used money for prostitution

Posted on : 2016-07-29 10:15 KST Modified on : 2019-10-19 20:29 KST
Recent video of Lee Kun-hee indicates that he failed to carry out plan to use borrowed-name account money responsibly
The villa in Seoul’s Nonhyeon neighborhood where videos released by Newstapa appeared to show Samsung chairman Lee Kun-hee soliciting prostitution. (by Park Jong-shik
The villa in Seoul’s Nonhyeon neighborhood where videos released by Newstapa appeared to show Samsung chairman Lee Kun-hee soliciting prostitution. (by Park Jong-shik

The 1.3 billion won (US$1.15 million) key money deposit on the apartment in Seoul‘s Nonhyeon neighborhood where a video was filmed that allegedly shows Samsung Electronics Chairman Lee Kun-hee soliciting prostitution turns out to have been drawn from borrowed-name bank accounts that were disclosed in a special prosecutor’s investigation of Samsung in 2008. The news is raising questions about what was done with the assets in Lee‘s borrowed-name accounts.

During an apology to the South Korean public and a statement of his resignation on Apr. 22, 2008, Lee promised to “do something worthwhile” with the money that remained in the borrowed-name accounts after paying late taxes, instead of using it for his family or for himself. But eight years later, Lee is under fire for having failed to keep his promise.

 staff photographer)
staff photographer)

The special prosecutor’s investigation into Samsung showed that the assets Lee held under borrowed names came to a total of 4.54 trillion won (as of Dec. 2007), which included 293 billion won in deposits, 4.1 trillion won in stock, 97.8 billion won in bonds and 45.6 billion won in checks.

In 2009, the next year, Samsung completed registering under Lee‘s name about 2.1 trillion won of stock in affiliates including Samsung Life Insurance, Samsung Electronics and Samsung SDI that had been held under borrowed names.

The conversion of the stock to Lee’s name is believed to have helped Lee consolidate his control of the group.

“Lee Kun-hee went through a rough patch when he had to apologize to the public, but the advantage was that it neatly settled the assets under other names that Lee had inherited from Lee Byung-chul, [his father and] founder of the Samsung Group. It also forestalled issues about assets under borrowed names that could occur when he attempted to hand over management rights of the group [to his children],” said Kim Sang-jo, director of Solidarity for Economic Reform (and a professor at Hansung University).

But it reportedly took a substantial amount of time to bring the cashable assets in the borrowed-name accounts - including deposits and bonds - under Lee’s control.

“During the conversion process, some of the nominal account holders claimed that the money actually belonged to them, and some of them had already given the money to their children as inheritance. Because of this, Lee was unable to recover some of the assets,” said a source who is knowledgeable about Samsung.

“Since some of the account holders argued that they were the real owners of Lee’s borrowed name assets, the assets couldn‘t be converted to Lee’s name until the facts had been determined, which took some time,” said a well-connected source at Samsung.

The problem was that Lee‘s promise to donate the assets was not kept during this process and still has not been kept. Even worse, some of these assets were used in highly inappropriate ways - such as the ones suggested by these videos.

The money that was used in 2012 to put a key money deposit on the apartment in the Nonhyeon neighborhood under the name of former Samsung SDS President Kim In is also presumed to be part of these assets.

After fines and late taxes are accounted for, the money that Lee was supposed to put to charitable purposes reportedly amounts to around 1 trillion won. But when asked on July 27 about how the assets from the borrowed-name accounts had been used, Samsung did not provide an answer.

This was not the first time the Hankyoreh has asked Samsung this question. In 2011, Samsung responded that Lee “appears to be giving the question careful thought.” In 2014, it said that Lee was “looking into where and when it would be most meaningful and most valuable to donate the money.”

“Until now, Samsung has said that they were working on a plan for how to donate the money and asked for patience until Lee Jae-yong could consolidate his control over the group. But since Lee Kun-hee made the promise, Samsung needs to quickly announce the plan for implementing that promise and to execute that plan,” said Kim Sang-jo.

In related news, the Seoul Central Office of the Prosecutors announced on July 27 that it had assigned all three of the complaints it had received about the videos that allegedly show Lee soliciting prostitution to the department for investigating crimes against women and children.

After online news outlet Newstapa reported the story on July 21, a civic group called the Working Class Livelihood Action Committee and a person living in Anyang, Gyeonggi Province, surnamed Park asked the prosecutors to investigate allegations that the videos showed Lee soliciting prostitution.

By Lee Jeong-hun, staff reporter

Please direct questions or comments to [english@hani.co.kr]

 

button that move to original korean article (클릭시 원문으로 이동하는 버튼)

Related stories

Most viewed articles