Samsung executives convicted of helping chairman transfer wealth to son

The Seoul Central District Court on Tuesday sentenced two executives of Samsung Group for their role in helping the group's Chairman Lee Kun-hee transfer massive wealth to his only son in illicit bond deals carried out a decade ago.

The court sentenced Her Tae-hak, former chief executive of Samsung Everland Co. to three years in jail and incumbent Samsung Everland President Park Ro-bin to two years in prison on charges of misappropriation. However, their sentences were suspended for respective terms of five and two years.

"The two Samsung executives are believed to have issued the Samsung Everland convertible bonds (CBs) for the purpose of transferring wealth to Lee Jay-yong. They just falsely attempted to sell the questioned CBs to company shareholders," South Korean Yonhap News Agency quoted the Seoul court as saying in its ruling.

The two executives were accused of selling the CBs to Jay-yong and his sister at below-market prices.

In November 1996, Samsung Everland sold nearly 10 billion won (9.8 million US dollars) worth of CBs to the siblings, which gave them the right to buy the company's common stock for 7,700 won (7.43 dollars) a share, far lower than its market price of 85,000 won (82.1 dollars) at that time.

The illicit deal is estimated to have cost Samsung Everland about 97 billion won (93.7 million dollars) in losses.A group of 43 university law professors brought a case against Samsung Everland, as well as chairman Lee, in June 2000, claiming that the company's board and management had permitted Lee's son to illegally control Samsung Everland and avoid a potential tax liability.

Her and Park were indicted in late 2003 by the Seoul District Public Prosecutor's Office.

Jay-yong and his three sisters reportedly own a combined 50.21 percent stake in Samsung Everland. The 37-year-old heir apparent, now a senior vice president of Samsung Electronics, personally holds 25.1 percent of Samsung Everland, which in turn owns the controlling 19.34 percent of Samsung Life Insurance.

Samsung Group defended itself against the ruling, insisting that the Samsung Everland CBs were issued and sold to Lee Jay-yong strictly in accordance with relevant regulations and laws.

The prosecution welcomed the guilty verdict but vowed to appeal to the Seoul High Court, complaining that the two Samsung executives deserved a real prison term, rather than suspended sentences, in consideration of their "active" role in the illicit CB sales.

Source: Xinhua