Samheung Chief Nabbed on Fraud Charges

Samheung Group President Kim Hyun-jae (47), otherwise known as the “Founder” of planned real estate in the domestic sector, was arrested on May 9 on charges of embezzlement, tax evasion, and fraud.

The prosecution confirmed that it is in the midst of verifying whether the unidentified 3.0 billion won, out of a total of 24.5 billion won worth of business funds embezzled by Mr. Kim, with deep ties in politics, has been handed over to politicians, in an announcement that is likely to stir much controversy.

Mr. Kim has been charged with fraud, on allegations of unduly reaping in a total of 21.2 billion won in profits over the course of two years, by purchasing the lands of Chungbuk Jecheon, Jeonbuk Muju, Gyeonggi Yongin, Icheon, and other districts at low prices, and later reselling them to investors at five to six times the average rate by providing false information, according to the 8th Criminal Investigation Department (Chief: Cha Dong-eon) of the Seoul District Prosecutor’s Office.

Mr. Kim is also under allegations of embezzling 24.5 billion won for private uses from five different subsidiaries, including Samheung Invest, a planned real estate firm, and evading tax obligations worth 8.9 billion won by purposely omitting the firm’s sales.

Prosecutors also announced that it had arrested seven executives/employees of the subsidiaries, including Samheung Century Chief Mr. Park, while deciding on indictment without detention for five others.

Kim Young-chul, the 1st Division Chief of the Seoul District Prosecutor’s Office, said, “Mr. Kim and others purchased fields of land, of which the usages are unable to modify, for 20-50 thousand won per pyeong, and later resold them for 370 thousand won each, beguiling buyers with false information. The number of victims confirmed to date has already gone over the 200 mark.”

Mr. Kim is reported to have initiated the planned real estate business in Korea in the late 1990s, and over the course of five years, starting from 2001, has bought and resold lands of roughly 20 different places nationwide, conjuring sales profits of 513.8 billion won.

While the usages of 21.5 billion, out of the total 24.5 billion won worth of embezzled funds have been revealed through investigation, the specific usages of the remaining 3 billion won, initially used in buying anonymous Certificates of Deposit purchased nominally under the names of firm executives and employees, has yet to be completely unveiled, confirmed the Prosecution.

The prosecution is carrying out its investigation with close regard to several noticeable revelations in Mr. Kim’s history that imply the possibility of the funds being used in the political sector, such as his close ties with influential figures of the Kim Dae-jung government, his role as Advisor for Democratic and Peaceful Unification under the current government, and his other previous role as a committee member of the Uri Party Special Committee for Citizen Life.

Of the billions of won Mr. Kim has embezzled, 2.4 billion was used for the support of his own Honam Daily Newspaper, acquired through a merge in 1999, while roughly five billion was lent or donated to families and friends.

The prosecution reports that Mr. Kim is denying allegations of the provision of illegal funds to the political sector.

woogija@donga.com