For LG, Doosan Scions, It’s Easier Than Easy Money
By Jane Han
Staff Reporter
The story goes back to the fall of 2006, when Koo Bon-ho, a cousin of LG Group Chairman Koo Bon-moo, made his first big-shot investment in a little-known travel company. On the news of his big buy-up, share prices spiked to record highs for weeks, rewarding the chaebol scion with a fortune. He moved on to bank in on similar investments and, along the way, the 33-year-old even picked up a new nickname ``the man with the Midas touch.''
But all of this came tumbling down three weeks ago when the high-profile LG relative was arrested on allegations of reaping billions of won through insider trading and stock manipulation.
Prosecutors said Koo took the gains of buffed up share prices after falsely suggesting that he would participate in management. Basically, it was his ``chaebol status'' and fancy background that got small investors convinced.
While this news may have initially grabbed some attention, not many ― especially in the stock market ― were surprised.
``It had been rumored for quite some time that a form of illegal transaction was involved in these `spectacular performances,''' said one trader, who asked not to be named.
He said that other ``theme stocks'' fronting the investment of second and third-generations of major conglomerates, including Doosan, GS, Hyundai and SK, have been enjoying similar status in the Kosdaq market.
``Considering how unattractive some of these firms are in terms of investment value, one can only assume that these chaebol offspring purchased them to make some quick money,'' he said.
But Koo's case has slammed on the brakes for these high-flying stocks, as prosecutors are reportedly looking into many of them to find evidence of irregular trading.
Of them, Park Jung-won, a fourth-generation heir of Doosan Group, is likely to be the first one to go, as he faces questioning over alleged embezzlement and stock price manipulation.
The scion purchased 1.3 million shares of New Wall Corp., a Kosdaq-listed firm, in March 2007 and took over management rights. Stock prices soon more than doubled from 5,000 won to a high of 10,4000 won per share. Park then sold all the shares to secure profits in December.
``A classic example of illegal schemes pulled off by chaebol sons and daughters,'' said a researcher at the Korea Securities Dealers Association, who asked to remain anonymous. ``There are so many more heirs involved than people think. This almost became a fad in their social circle.''
Aside from the ethical issue, the biggest problem with this, he says, is that innocent, small investors are the victims.
``It's disappointing and depressing to see that the younger generation of the country's biggest companies are already seeking illegal ways to beef up their wealth,'' he said.