November 22, 2024

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[THE INVESTOR] The South Korean Supreme Prosecutors’ Office raided offices of the National Pension Service and Samsung Group on Nov. 23 as part of its probe into the influence-peddling scandal involving President Park Geun-hye and her long-time confidante Choi Soon-sil.

The state-run fund -- then the largest shareholder of Samsung C&T with around 10 percent stake -- voted in favor of the merger between the construction firm and materials firm Cheil Industries in a shareholders meeting, in May last year. 

The merger of the Samsung Group affiliates stirred controversy at the time as global funds such as Elliott Management had opposed the deal on grounds that the merger was aimed at increasing the wealth of the Samsung family owner and would damage shareholders’ asset value as the share swap ratio was unfairly set in favor of Samsung C&T.

In addition, investment advisors including ISS recommended against the merger between the Samsung affiliates, citing the similar reasons raised by Elliott.

Despite such opposition, the NPS cast a vote supporting the merger -- vice chairman Lee Jae-yong was the largest shareholder at the materials firm.

Making use of her close relationship with President Park, Choi is suspected of having wielded her influence to put pressure on NPS to approve the merger.

The prosecutors will investigate if NPS’ support for the deal was in return for Samsung’s alleged backing of Choi’s illicit businesses.

Samsung Group offered 3.5 billion (US$2.99 million) funds for the Mir Foundation and K-Sports Foundation, dubious organizations set up by Choi and her aides, and 500 million won for a winter sports training program run by Choi’s niece Jang Si-ho.

Most of the money given to the two foundations, aimed at promoting sports and culture sectors here, are said to have been used to purchase equestrian fields and equipment and horses for Choi’s daughter Chung Yu-ra, a former national equestrian athlete.

The prosecution also raided the office of Samsung Group’s future strategy office, a control tower of the conglomerate, and the offices of former and current NPS officials on the same day in line with the probe.

By Kim Young-won (wone0102@heraldcorp.com)