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Posted : 2009-08-14 18:20
Updated : 2009-08-14 18:20

Lee Kun-hee Convicted Over Bond Deal

Given 3-Year Suspended Prison Term With $89 Million Fine

By Park Si-soo
Staff Reporter

Former Samsung Group Chairman Lee Kun-hee was handed a three-year prison term suspended for five years Friday for illegal bond trading which caused financial damage to a Samsung subsidiary. He was also fined 110 billion won (about $89 million)

The Seoul High Court convicted the 67-year-old Lee of forcing Samsung SDS to sell bonds with warrants (BW) to his only son Jae-yong at below fair market prices in 1999, apparently to transfer the ownership of the nation's largest conglomerate to him.

The ruling may lead to Lee giving up his IOC membership. He is one of two Korean IOC members. He had previously notified the IOC of a voluntary suspension of his membership until a final court ruling. The IOC will review his membership late this year. In July, prosecutors demanded a six-year jail sentence for Lee.

The presiding judge, Kim Chang-seok, said Lee and other Samsung executives inflicted 22.7 billion won in damages to the subsidiary through the issuance of bonds at 7,150 won, much lower than the estimated market price of 14,230 won.

"The deal was unfair and dealt a considerable loss to the company. We believe he was aware of the illegal deal," the judge said. Lee, wearing a black suit, listened quietly to the verdict and then left the courtroom.

In previous hearings, Lee claimed the issuance was to inject emergency funds into the subsidiary, which was in need of cash. But the court dismissed the claim saying, "No evidence of this exists."

This was the second ruling on the charge by the appellate court. In the first ruling, Lee was cleared of the charge. The court stated that the statue of limitations had expired in the Samsung SDS case, because the amount of losses did not exceed 5 billion won.

In May, however, the Supreme Court overturned the verdict and returned the case to the appellate court for a retrial, saying the lower court had applied the wrong method in comparing the price of the BW issued and their market value.

Following the Friday ruling, the prosecution was considering appealing the top court again. But many say it's unlikely the verdict will be overturned.

"We will decide whether to appeal or not after thoroughly reviewing the verdict," said special prosecutor Cho Joon-woong.

Some progressive civic groups said they were disappointed with the ruling.

"It's regrettable that the court failed to give appropriate punishment to the accused," said Kim Sang-jo, executive director of the Solidarity for Economic Reform.

Lee stepped down from the group's top management in April last year after he was indicted for inflicting losses on Samsung companies and failing to pay taxes.

pss@koreatimes.co.kr

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