Huh Tae-Hak and Park Ro-Bin, former and current presidents of Samsung Everland, the group's holding firm, were convicted of embezzlement relating to the murky ownership transfer, the Seoul central district court said.
Huh and Park were sentenced to suspended jail terms of three and two years respectively, the court said.
The prosecution said that it would appeal to a higher court for a tougher sentence while Samsung said that it was considering appealing against the convictions.
The guilty verdicts called into question the current ownership structure and the corporate governance of Samsung Group, civic groups said.
The charges focus on a 1996 stock transaction at Samsung Everland, which helped group chairman Lee Kun-Hee pass on control of the family-run empire to his son, Lee Jae-Yong.
Lee Jae-Yong bought 1.25 million Samsung Everland shares at 7,700 won ($7.4) per share - far lower than the lowest trading price of 85,000 won at the time - via an issue of convertible bonds (CBs).
"Though pretending to allocate holdings to shareholders, the accused apparently issued the CBs for the purpose of transferring wealth to Lee Jae-Yong," the court said in a ruling.
The transaction cost Samsung Everland 97 billion won in lost share income, investigators said.
The court said that the two convicted executives "handed to Lee Jae-Young profits equivalent to the amount the company lost".
The transaction sparked protests from civil activists, including law professors, who filed a complaint against Samsung chairman Lee with the Seoul prosecutors in June 2000.
State prosecutors formally indicted Huh and Park for embezzlement in December 2003. They demanded that the two, who still deny any wrongdoing, receive prison terms of five and three years respectively.
Samsung Everland, which runs South Korea's biggest amusement park, controls the group through a web of ownership that includes a 19.3 percent controlling stake in Samsung Life Insurance and major stakes in other group affiliates.
Lee Jae-Yong also serves as a top executive at Samsung Electronics, the world's biggest memory chipmaker.
The murky ownership structure of South Korea's major business groups has come under close scrutiny since the 1997 Asian financial crisis.
Critics say that conglomerate owners have engaged in illegal intra-group transactions, transferring wealth to their offspring or manipulating share trading to avoid inheritance taxes.
Samsung Group did not immediately react to the court ruling but its corporate lawyers were in consultations on whether to appeal, the firm said.
An unnamed prosecution official told Yonhap news agency that the prosecution would bring the case to an appeals court for tougher punishment and also expand investigations into other alleged Samsung Group irregularities.
Civic groups hailed the verdict, with the People's Solidarity for Participatory Democracy saying that the courts had "for the first time acknowledged that Samsung Group's irregular ownership transfer brings losses to other firms and shareholders".
The court verdict adds to Samsung's problems, with parliament last week calling chairman Lee Kun-Hee to appear before it on Wednesday to question him over debts left unpaid by the group's bankrupt Samsung Motors.
Lee, 64, is currently in the United States for medical reasons and it is not yet known whether he will attend the hearing.
© 2005 Agence France-Presse
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