Samsung chairman Lee Kun-hee wins court battle over US$3 billion in assets

Posted on : 2013-02-02 13:20 KST Modified on : 2019-10-19 20:29 KST
Peace not likely to come soon to the Samsung family, as siblings say they will appeal the ruling

By Park Tae-woo, staff reporter

The judge ruled in favor of Samsung chairman Lee Kun-hee in his legal battle with older brother and former Cheil Fertilizer chairman Lee Maeng-hee over a supposed inheritance from their father and Samsung founder Lee Byung-chull.

The court found that most of the stocks and dividends the 82-year-old Lee Maeng-hee was demanding to be returned could not be viewed legally as an inheritance, while the ten-year period during which restitution could be claimed had passed for the remainder.

The 32nd civil division of Seoul Central District Court, under chief judge Seo Chang-won, ruled on Feb. 2 to dismiss a portion of the claims made against Samsung Everland by Lee Maeng-hee, the oldest son of Lee Byung-chull, demanding the handing over of stock. It also ruled to dismiss the claims of other plaintiffs, including Lee Sook-hee, 78, who is Lee Byung-chull's second daughter.

With the stocks valued at more than US$3 billion, the outcome of the trial could have had a major impact on the leadership structure at the Samsung Group. But the first trial over the so-called "Samsung legacy" ended with a lopsided victory for Lee Kun-hee.

The saga has been nothing if not heated. On one side is Lee Kun-hee, inheritor of the group's leadership from his father; on the other side are his siblings, including Lee Maeng-hee, who was ruled out of contention for a possible leadership position early on. The emotional battle was raging before the trial even began. Once the siblings got into the courtroom, charges of "dirty dealing" began to fly.


Lee Maeng-hee launched the suit in February 2012, claiming that his brother, unbeknownst to any of his siblings, had secretly inherited stocks in Samsung Life and Samsung Electronics that Lee Byung-chull had held under an assumed name for the group while he was alive. Other Lee siblings subsequently joined the suit.


The attacks between the two sides began before the first trial started in May. Lee Kun-hee kicked things off in April by declaring the had "no intention of giving a penny" to his older brother, whom he described as a "substandard individual."

The older Lee fired back through the CJ Group, which his son runs. "I was astonished to hear Kun-hee making such childish statements," he said. "Greed is what caused this lawsuit."

The younger brother replied that he was "not one to be talked to as 'Kun-hee, Kun-hee.'" (In Korea, it can be rude to address someone by their given name.)

Even the foreign press gave major coverage to the war of words between brothers from the richest family in South Korea.

The legal battle was also heated, lasting for eight hearings under Seoul Central District Court.

The first question was whether an agreement to partition the stocks had been made when Lee Byung-chull died in 1987 and the siblings signed inheritance-partitioning agreements in 1989. The court concluded that it had not, effectively siding with the older Lee who claimed that his brother had inherited the stocks without the other siblings' knowledge.

The next question was whether Lee Kun-hee's current stocks were the same as his father's assumed-name stocks, having gone through several name changes and sales. Lee Maeng-hee argued that he had a right to claim his younger brother's current assets because the current stocks were established on the basis of the inheritance. The court disagreed, saying Lee Maeng-hee could only claim the actual inheritance.

"Although it may be considered a separate issue as to whether you can claim the return of unfair profits or damages for illegal activity for the value when an inheritance is disposed of or lost, you cannot deem the value of another object or authority obtained through that value to be an inheritance and include it in the object of an inheritance recovery claim," the court said.

Based on this reasoning, the court concluded that Lee Maeng-hee could not legally demand the return of the assumed-name Samsung Electronics stocks discovered during the trial through the investigation records of a previous special prosecutor's investigation of Samsung, nor was he entitled to claim the bulk of the Samsung Life stocks or the dividends earned through them by his brother.

The court stipulated that the only inherited assets for which Lee Maeng-hee and the other plaintiffs could make a claim for recovery of inheritance were the 50,000 shares of stock in Samsung Life Insurance that were in the possession of Lee Byung-chull at the time of his death in 1987. (These 50,000 shares became 500,000 shares after the stock split, and the plaintiffs are only able to claim around 390,000 shares of these.)

However, the court dismissed this on the grounds that the restitution period had ended. The exclusion period, which refers to the period during which one may file a claim to regain assets from someone who has received an inheritance unfairly, is defined as 10 years from the time when the right to inheritance was violated, or 3 years from the time when one learns that one’s right to inheritance had been violated.

The central question in the case was whether Lee Kun-hee’s violation of the inheritance rights should be considered to have taken place in 2008, as argued by Lee Maeng-hee, when Lee Kun-hee put the borrowed-name stock under his own name, or in 1988, when Lee Kun-hee exercised his voting rights and his right to request dividends as the stockholder of the borrowed-name stock at the general stockholders’ meeting.

The court sided with Lee Kun-hee on this point. As a result, they made their ruling based on the 24 years that had passed between 1988 and 2012, when the lawsuit was filed. In short, the court did not accept the majority of the arguments made by Lee Maeng-hee.

“It seems to me that Lee Byung-chull’s last wishes, which came to light during arguments made by both sides, probably included the desire that his family would be united and live together in peace,” the presiding judge said before delivering the verdict.

“I hope that all of the members of this family, both plaintiff and defendant, will come together and reconcile.”

But the fact is that Lee Maeng-hee suffered a major defeat in the case. “The verdict in the case took us by complete surprise,” the lawyer for the plaintiffs said.

“After reviewing the decision and discussing with our clients, we will appeal.”

Despite the wishes of the presiding judge, the fight over the Samsung family inheritance is expected to continue in the court of appeals.

Please direct questions or comments to [englishhani@hani.co.kr]

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