hankyoreh

Samsung Group Chairman Lee Kun-hee and other company executives bow their heads prior to holding a press conference in the basement of Samsung’s main building on Apr. 22

“The borrowed name accounts that were investigated for tax evasion by the special prosecutor had been nominally entrusted to other people to protect the management rights of the group, and they will now be registered under Chairman Lee Kun-hee’s real name. Lee has promised to pay all the missing taxes and then to find a way to spend the remaining money on something worthwhile rather than for himself or his family.”

This passage appears in Lee’s apology to the nation and the management reform plan, both of which were released by the Samsung Group on Apr. 22, 2008. But Samsung and Lee reneged on their promise to register the borrowed name accounts under Lee’s actual name and pay the missing taxes. In this process, as much as several trillion won (several billion US dollars) was apparently given to Lee instead of being transferred to the government treasury.

On Oct. 15, the Financial Supervisory Service (FSS) provided Democratic Party lawmaker and National Assembly National Policy Committee member Park Yong-jin with data on borrowed-named accounts and real name adoption at different banks as confirmed by special prosecutor Cho Joon-woong in 2008. The findings showed just one real name registration from among 64 borrowed name accounts, and none at all for 957 securities accounts.

“The one case of real name registration among bank accounts involved a change to the name of the borrowed account owner [an employee]. For the accounts owned by Lee Kun-hee, there were no real name registrations, and the money was withdrawn from all of them after they were closed,” said Kang Seon-nam, head of the inspection planning team for the FSS’s general bank bureau.

All funds were withdrawn or wired out of the 957 securities accounts, 646 of which were closed down. The other 311 remain open, but have zero balances or contain only small balances such as deposit usage fees deposited afterwards, the FSs explained.

In 2008, the special prosecutor tracked down over 1,000 borrowed-name accounts in the name of 486 former and current Samsung employees, containing some 4.5 trillion won (US$4.0 billion) in stocks (4.1 trillion won/US$3.6 billion) and cash (300 billion won/US$266 million), which Lee acknowledged to have inherited from the previous chairman, his father Lee Byung-chul.

Samsung previously announced that 4 trillion won in Samsung Electronics and Samsung Life stocks in borrowed-name accounts as of late 2008 (shortly after the special prosecutor’s investigation) had been converted to Lee’s actual name. But the approach involved closing the borrowed-name accounts and depositing the balance into accounts under Lee’s name – a different process from an actual real name registration, which entails penalties and tax payment obligations according to the Real Name Financial Transactions Act.

Real name registrations performed after the compulsory period between implementation of the Emergency Financial Decree on Real Name Financial Transactions and Guarantees of Secrecy on Aug. 12, 1993, and Oct. 12 of the same year result in up to 99% of income and residence tax withheld from past interest and dividend earnings, and a penalty of 50% of asset value at the time of the decree once five years have passed. Had Lee actually converted the accounts to his own name, he would have had to pay trillions of won in estimated taxes and penalties to the government; by using the different approach to change names, he was able to recover all of his borrowed-name assets.

“Because financial authorities issued an authoritative interpretation declaring that borrowed-name accounts were not secret assets carrying a real name registration obligation according to the Real Name Financial Transactions Act, Lee Kun-hee was able to recover his borrowed-name assets without paying a cent in taxes,” Park Yong-jin said.

“We need to charge him now for the missed taxes and penalties.”

By Lee Soon-hyuk, staff reporter

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