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[Shin Yong-bae] ‘Lee Hak-soo bill’ worries

The National Assembly is hitting Samsung’s nerve with the so-called “Lee Hak-soo bill” tailored to target chairman Lee Kun-hee’s three scions and his two former key aides.

A total of 104 lawmakers in the 300-member unicameral house signed the proposal aimed at confiscating profits made through breach of trust or embezzlement.

The bill was submitted to the Assembly last week and is awaiting deliberation at relevant standing committees.

“The Specific Criminal Profits Forfeiture Bill” was crafted by Rep. Park Young-sun, a TV anchor-turned-opposition politician who has earned the nickname “Samsung sniper” from news media.

Rep. Park said she had promoted the bill to confiscate illegal profits in an effort to realize “social justice.” She and news media call it the Lee Hak-soo bill to help broaden public understanding. Lee is a former Samsung vice chairman who had long assisted the chairman as his right-hand man.

What is noteworthy in the bill is that even those who are not directly involved in such financial crimes but make profits of more than 5 billion won from others’ illegal activities are subject to confiscation.

If the bill is passed, the five major stakeholders of Samsung SDS ― the three siblings, Lee Hak-soo and another former aide, Kim In-joo ― would see their combined profits of several trillion won go to the national coffers.

The three billionaire scions ― Samsung Electronics vice chairman Jay-yong, Hotel Shilla president Boo-jin and Cheil Industries president Seo-hyun ― hit the jackpot when Samsung SDS, the group’s IT solutions provider, was listed last November. They are said to have benefited about 200- to 300-fold from the listing despite their small investment in the company in 1999. Lee Hak-soo and Kim In-joo, who were then on the Samsung unit’s board of directors, also reaped huge gains from the listing.

But it remains yet to be seen whether the proposal will be able to pass the National Assembly given that most of the signatories are opposition lawmakers and the conservative and chaebol-friendly ruling party still controls the legislature.

Apart from its chance for passage, the bill is currently stoking a controversy among scholars, politicians and businesspersons over its constitutionality.

It is quite right that huge financial gains collected through illegal methods should be forfeited.

But this bill is not free from a legal dispute over retroactive legislation, infringement of individuals’ property rights and double jeopardy, all of which are banned by the nation’s Constitution.

It is agreeable with a claim that the Samsung SDS case ended legally in 2006 when the Supreme Court punished chairman Lee and his two lieutenants for breach of trust and tax evasion. The court ruled that they financially damaged the company by allocating its bonds with stock purchase warrants to the three siblings and the two aides far lower than the market value in 1999.

Chairman Lee paid a dear price for the financial malfeasances. He was sentenced to three years in prison with a five-year suspended jail term as well as a fine of 110 billion won. His two aides were also convicted for breach of trust.

It does not end there. He paid financial damages amounting to 22.7 billion won inflicted on Samsung SDS due to the heavy discount of BWs, delayed interest payment of 13 billion won and 44.3 billion won in gift tax. As a token of apology, the chairman also donated 520 billion won to charity.

The controversial bill also seems to have ambiguity in connection with the scope of illegal gains. The assertion that the bill’s target of confiscation should be illegal profits, not financial gains made through stock listings, looks more persuasive.

The bill’s legislation may also face criticism that it targets certain persons or a specific case that happened in the past, failing to cover crimes in a comprehensive manner. Rep. Park herself also admitted that the bill targets the Samsung family.

The purpose of the bill should be to prevent illegal profits in the future.

By Shin Yong-bae

Shin Yong-bae is the business editor of The Korea Herald. He can be reached at ― Ed.