The chairman of the Samsung Group, Lee Kun-hee, comes in at No. 106 on Forbes’ list of the world’s top billionaires, with a reported net worth of $8.3 billion. But did he acquire some of that fortune illegally from his late father’s trust?
That’s what his brother and sister accuse him of in a recent lawsuit that is growing uglier by the day. And it all stems from the fact that Mr. Lee’s father never did the proper estate and succession planning.
In February, Kun-hee’s older brother, Lee Maeng-hee, filed the lawsuit in Seoul, South Korea. Now joined by two other family members, the lawsuit claims that when their father, Samsung Group founder Lee Byung-chull, died in 1987, he left millions of shares in Samsung Life Insurance (the world’s 14th largest insurance company) as well as preferred stock in Samsung Electronics and cash, in trust. Specifically, he placed the asset into the name of Samsung executives for the benefit of his family.
Lee Kun-hee then wrongfully took the stock and cash and transferred it into his own name, rather than dividing it among the heirs as he was supposed to, according to the allegations.
The U.S. value of the stock is around $877 million. If Kun-hee loses, it could potentially cause him to lose his controlling interest in the Samsung Group, which controls dozens of companies, including Samsung Electronics.
The eldest brother said he never understood why his father did not leave controlling interest to him, which is traditional in Korean society. Last week, he accused his younger brother, Kun-hee, of acting childish and greedy.
If the allegations are true, why did this take 25 years to come to light? Maeng-hee says he’s been trying to find out what happened to the stock for 25 years. Events started to come to light in recent years because of a corporate whistleblower who used to be Samsung’s top attorney.
In 2007, the attorney brought to light that Kun-hee was evading taxes by holding stock and other assets in the name of other people. Mr. Lee was prosecuted, found guilty of tax evasion, and forced to step down as the Samsung Group chairman. But South Korea’s President later pardoned him, after he paid a large fine and transferred the stock to his own name. His three-year jail sentence was rescinded.
Perhaps that is why Lee Kun-hee is so confident about winning this lawsuit. He vows to fight the suit to South Korea’s highest court, refusing to settle. Last week, he publicly ridiculed his older brother, saying he had been exiled from the family and was not permitted to look at him in the eyes. Lee Kun-hee told reporters when discussing his older brother, “How dare he say my first name?”
A recent New York Times article discussing the case reported that these types of family fights over large Korean conglomerates are common. Recent inheritance battles have affected Korean companies like Hyundai, Kumho and Doosan.
Why? Because, often, the founders of these companies have tried to substitute proper legal planning with secret arrangements to pass control through less formal means. That certainly was the case with Samsung, and now the proud Lee family is embroiled in a bitter and ugly lawsuit because of it.
It’s a lesson for all of your clients, especially those who own businesses. Don’t assume that because your clients are successful in business, that they’ve done the proper estate and succession planning. It’s easy to procrastinate when you’re busy running a business. Encourage your clients to plan how their assets, including ownership interest in any business they own, will pass onto the next generation.
It’s especially important for them to choose those who will be in control after they’ve gone, carefully. And it should all be documented the right way with an experienced estate planning attorney, and if necessary, a business succession attorney as well. Simply trusting that their heirs or employees will honor their wishes and “do the right thing,” without the proper planning in place, is asking for trouble.
By Danielle and Andy Mayoras, co-authors of Trial & Heirs: Famous Fortune Fights!, husband-and-wife legacy expert attorneys, and hosts of the national television special, Trial & Heirs: Protect Your Family Fortune! For the latest celebrity and high-profile cases, with tips to protect yourself, your loved ones, and your clients, click here to subscribe to The Trial & Heirs Update. You can “like” them on Facebook and follow them on Twitter.