Shares were then sold to family members, court finds
The People’s Solidarity for Participatory Democracy (PSPD), South Korea’s influential civil action group, won a lawsuit against LG Group chairman Koo Bon-moo and other executives, following the group’s similar legal victories against Korea First Bank and Samsung Electronics. On Aug. 17, the Seoul southern district court ordered eight former and incumbent directors of ex-LG Chemical, including LG Group chairman Koo Bon-moo, to pay 40 billion won ($US41 million) in damages to LG Corp. On Jan. 27, 2003, PSPD filed the lawsuit against the eight directors of former LG Chemical (currently LG CI), accusing them of selling the company’s shares in affiliate LG Petrochemical to themselves and their relatives at below market prices. The PSPD sought 82.3 billion won in damages.In a court ruling, the judge said that if executives "cause loss to the company by selling the company’s shares in an unlisted affiliate at below market prices, they have a responsibility of compensating for the loss." Chairman Koo Bon-moo, Heo Chang-soo (chairman of GS Group), Heo Dong-soo (chairman of GS-Caltex Corp.), executives Kang Yoo-shik, Sung Jae-kap, and Cho Myung-jae, and two outside directors were ordered to pay a total of 40 billion won in damages. In June 1999, the eight directors of LG Chemical sold a 70 percent stake, or 27.44 million shares, in LG Petrochemical to 34 family members, including themselves, for 5,500 won per share. At that time, an appropriate share price of LG Petrochemical was 8,500 won per share. As LG Petrochemical listed its shares in 2001, the 34 people were believed to pocket a total of 264 billion won in investment gains. “We welcome the court decision, which confirmed the responsibility of compensation related to the stock transactions of an unlisted company,” said Park Geun-yong, head of PSPD’s judicial monitoring team. "However, it doesn’t make sense why the court halved the damages to 40 billion won, given the owner’s family’s illicit gain of 264 billion won." PSPD plans to decide on whether to appeal following completion of an analysis of the ruling.
