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Samsung Chief 'Spent Slush Funds Like His Own Money'

Samsung chairman Lee Kun-hee spent the conglomerate’s slush funds as if they were his own money, a former senior legal advisor to the conglomerate said. Kim Yong-chul said Lee on one occasion spent 60 billion won (US$64.5 million) on artworks for his wife, Hong Ra-hee, who is the director-general of Samsung Museum of Art or Leeum.

Kim, who headed the legal department at Samsung Restructuring Office, from 1997 until 2004, made the allegations in a press conference at Jegi-dong Catholic Church in Seoul.

Prosecutors on the same day banned some five Samsung executives from traveling overseas, including apparently Lee Hak-soo, the influential vice chairman of the Restructuring Office, and Kim In-ju, its president.

Kim said Hong Ra-hee, Shinsegae Group chairwoman Lee Myung-hee, Park Hyun-ju, the mother-in-law of Lee Kun-hee's son Jae-yong, and Shin Yeon-kyun, the wife of Joongang Ilbo chairman Hong Seok-hyun, bought several expensive artworks between 2002 and 2003. "Hong Ra-hee often called the Restructuring Office to pay for the artworks,” he said. He added the money spent on buying the artworks was part of the slush funds managed by the Restructuring Office's financial team.

Kim displayed a document he said backs up his claim. "Samsung amassed more than 200 billion won in slush funds by making Samsung's affiliates pay 15 to 20 percent more than the actual price of equipment when they bought it through overseas branches of Samsung Corp.,” one of the group's core affiliates, he said. Kim listed by name some dozen Samsung executives who he said managed a considerable portion of chairman Lee Kun-hee's family assets.

Kim also shed new light on a 2005 secret-service wiretapping scandal. He said the Joongang Ilbo newspaper, which has close links to Samsung, around 1999 negotiated to buy tapes made during the eavesdropping organized by the Agency for National Security Planning, the National Intelligence Service's precursor.

Tapes disclosed to the press in 2005 carried conversations between the Joongang Ilbo's Hong Seok-hyun, the brother of Lee Kun-hee’s wife and later Korea’s U.S. ambassador, and Lee Hak-soo about the delivery of illegal presidential campaign funds to then candidate Lee Hoi-chang in 1997.

During the 2005 investigation of the eavesdropping case, it emerged that a Korean American named William Park, who had received the files from a former member of the intelligence agency's wiretapping team, visited Samsung in late September 1999, demanding W500 million for them. But the claim that Park also visited the Joongang Ilbo is new.

The Joongang Ilbo denied the allegation. As a result of the investigation, William Park was sentenced to a year and two months in prison.

Samsung denied all allegations and vowed to fight them through its lawyers.

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