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Wednesday, October 05, 2005

Print Story: South Korean parliament grills Samsung executives on Yahoo! News

Print Story: South Korean parliament grills Samsung executives on Yahoo! News South Korean parliament grills Samsung executives

Wed Oct 5, 5:07 AM ET

South Korea's parliament 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 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 chip maker.

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 dollars).

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

Yoon insisted in turn 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 creditors had tried to strong-arm Samsung into paying off the auto firm's debts by threatening to withold futher 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 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 five percent stake in non-financial 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 five 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 they would make it and other companies more vulnerable to hostile takeovers by foreign investors.

Two Samsung executives were convicted 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 conglomerate owners have engaged in illegal intra-group transactions, transferring wealth to their offspring or manipulating share trading to avoid inheritance taxes.

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