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South Korean parliament grills Samsung executives
By Jun Kwanwoo (AFP)
Published: September 29, 2005
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South Korea's parliament on Wednesday grilled top executives from Samsung Group over unpaid debts and allegations that the group was resisting corporate reform, lawmakers said.

Lawmakers also questioned corporate governance at the country's largest conglomerate following the conviction on Tuesday of two executives for illegally handling the father-to-son transfer of ownership a decade ago.

Top Samsung Group executives, including Chairman Lee Kun-Hee, were asked to testify at the hearing.

Lee, 64, failed to appear, however. He left for the United States citing medical reasons before the parliamentary summons was issued last week and has not returned home, the company said.

Instead parliament's Finance and Economy Committee heard from other executives including Yoon Jong-Yong, vice-chairman of Samsung Electronics, the world's largest memory chipmaker.

Lawmakers questioned them about huge debts left unpaid by the group's bankrupt Samsung Motors, a victim of the Asian financial crisis of 1997.

Samsung Group is at odds with Samsung Motor's creditors who are claiming unpaid debts estimated at 4.7 trillion won ($4.6 billion).

"Samsung Motors was unwilling to pay it back from the beginning," Park Young-Sun, a lawmaker of the ruling Uri Party, said.

Yoon insisted in turn that Samsung had no legal obligation to pay the debt.

"Chairman Lee is not legally responsible [for the debt payment]. There could be an ethical responsibility, if any," Yoon said.

Yoon said that creditors had tried to strong-arm Samsung into paying off the auto firm's debts by threatening to withhold further financing from the group at a time when it was weak as a result of the financial crisis.

On corporate governance, lawmakers accused Samsung of defying a government drive for reform intended to reduce cross-shareholdings and so family control over the companies.

Sim Sang-Jeong, an opposition Democratic Labor Party lawmaker, said that the "cross-shareholdings among Samsung Group units should be addressed more than anything else" by the government's reform drive.

Under a 1997 law financial units belonging to the conglomerates, or chaebol, are banned from owning more than a 5 percent stake in nonfinancial affiliates of their parent groups without government permission.

The government is drawing up amendments compelling conglomerates to dispose of all stock holdings that exceed the 5 percent limit in an effort to curb family control over the groups and better protect other investors.

Samsung has publicly objected to those regulations, claiming that they would make it and other companies more vulnerable to hostile takeovers by foreign investors.

Two Samsung executives were convicted on Tuesday of illegally handling the father-to-son transfer of ownership at Samsung Everland, the group's holding company, to bolster the family-run corporate structure.

In a 1996 stock transaction Samsung Everland helped group chairman Lee pass on control of the empire to his son, Lee Jae-Yong.

Lee Jae-Yong bought 1.25 million Samsung Everland shares at 7,700 won per share - far lower than the lowest trading price of 85,000 won at the time - via an issue of convertible bonds.

Samsung Everland, an amusement park operator, 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 units.

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.




© 2005 Agence France-Presse

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