hankyoreh

Samsung Electronics Chairman Lee Kun-hee bows his head as he issues a public apology to the nation regarding maintenance of a private slush fund on Apr. 22

South Korea’s financial authorities recently determined that a significant number of the borrowed name accounts discovered by a special prosecutor who investigated Samsung in 2008 were maintained by Samsung Electronics Chairman Lee Kun-hee long afterward without converting them to his real name. But it remains unclear why Lee did not immediately convert the borrowed name accounts to his real name.

Doubts have also been raised recently about whether Lee properly announced his stock holdings when he converted other borrowed accounts to his real name. There are calls for the various allegations surrounding Lee’s borrowed name accounts to be investigated by the prosecutors.

According to a source with the financial authorities, the Samsung special prosecutor and others have identified a total of 1,229 borrowed name accounts controlled by Lee. 1,199 of these were found by the special prosecutor (two of these being duplicate accounts), and 32 more turned up when the Financial Supervisory Service was reviewing the special prosecutor’s findings. The additional 32 were listed in the review materials but were not made public.

During an inspection carried out after the issue of real name conversion of Lee’s borrowed name accounts was raised in Nov. 2016, the financial authorities determined the time when real name conversion occurred. Inspectors found that 37 accounts were converted before 2008 and just 769 in 2008. The remaining 93 were converted between 2009 and 2016, with an additional 275 conversions taking place in the first half of 2016 alone. Furthermore, 55 accounts are still maintained under borrowed names. “17 of these 55 accounts don’t contain a balance, and the other 38 only contain small amounts below 500,000 won,” another source with the financial authorities said.

This is the first time that the timing of the real name conversion of Lee’s borrowed name accounts has been made public. Prior to this, the financial authorities had presumed that the majority of these borrowed name accounts had undergone real name conversion in 2008 and 2009. These facts did not even turn up in several audits of the Financial Supervisory Service and the Financial Services Commission by the Board of Audit and Inspection that have taken place since 2008.

“The Real Name Financial Act only mandates that we ensure that financial organizations have fulfilled their duty to verify a client’s real name when opening an account, so we were unable to assess how the borrowed name accounts were being maintained after their discovery,” said a senior official with the financial authorities. As a consequence, the financial authorities have been unable to figure out why Lee’s borrowed name accounts were preserved and managed for so long.

Separately from this, new doubts have been raised about whether Lee corrected his publicly reported stock holdings at the right time while his other borrowed name accounts were undergoing real name conversion. During a recent raid on the Seoul office of the National Tax Service, the National Police Agency learned that Lee had voluntarily reported over 200 borrowed name accounts to the tax authorities in 2011, after the deadline. All of these were securities accounts containing stocks that the special prosecutor had failed to discover in 2008.

When the Hankyoreh reviewed the Financial Supervisory Service’s electronic reporting system and the Fair Trade Commission’s OPNI portal providing data about South Korea’s chaebols, it was unable to find any related data in stockholding changes since 2010 at the five Samsung affiliates (including Samsung Life Insurance) in which Lee is a major stockholder.

“If [Lee] had at least voluntarily reported the stock under a borrowed name [to the tax authorities], we ought to see a change in his stake. The fact that there’s no record of that raises questions,” said a senior source with the financial authorities. “Since the financial authorities aren’t currently aware of what was voluntarily reported to the National Tax Service, it’s impossible to say whether there was a violation of the duty to report changes in stock holdings.”

In related news, it turns out that the borrowed name accounts that were discovered by the Samsung special prosecutor in 2008 contained 2.5 trillion won (US$2.35 billion) in financial assets as of the end of 2007, not 4.4 trillion won (US$4.1 billion) as had been previously reported. This means that Lee stored the remaining 2 trillion won (US$1.9 billion) separately in the form of stock and commodity certificates, instead of in security accounts.

By Kim Kyung-rak, staff writer

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