Samsung monarchy survives $4 billion family feud

samsung family

Controversial Samsung chairman Lee Kun-hee has survived an assault on his reign over the family-run chaebol. Lee's older brother Maeng-hee had led a group of relatives in legal action against the chairman, asserting that they had a right to stakes in Samsung Group worth a total of 4.1 trillion won, or $3.74 billion. Reuters reports, however, that a Seoul Central District Court judge took Lee Kun-hee's side in the dispute, allowing him to retain his shares. A lawyer for the plaintiffs said "This is a totally unexpected ruling and we'll decide whether to appeal after discussing with our clients," while Lee Kun-hee's lawyers described the outcome as reasonable.

"This is a totally unexpected ruling."

Lee Maeng-hee and sister Sook-hee had sought a quarter of Kun-hee's share in Samsung Life, an insurance company in Samsung Group. The pair argued that they had been willed the shares by their father, Samsung founder Lee Byung-chull, when he died in 1987, but new chairman Lee Kun-hee hid these shares from them. Through allegedly duplicitous shuffling, this allowed him to gain control over Samsung Electronics, which he then turned into the most important and valuable division of the group with an aggressive expansion strategy in the 1990s. His position in court was that, as chairman, he had the authority to transfer shares as he pleased; the Seoul judge ultimately agreed, saying he hoped that "both parties have a happy life together with no quarrels."

A bruising and personal dispute

The family feud isn't just about money — it's a bruising and personal dispute that dates back decades. Lee Kun-hee has said that Maeng-hee was "kicked out" of the family, for example, and severed ties with Sook-hee after she married a man from the Koo family that runs rival chaebol LG. According to Lee Kun-hee, his father said to Sook-hee that she wouldn't receive Samsung stock because of this transgression, which occurred just as the relationship between the company and its rival was souring. LG was the dominant electronics company in South Korea at the time, and Lee Kun-hee believed that it was trying to leverage its family influence to stop Samsung entering the same industry. Lee Maeng-hee, meanwhile, has called Kun-hee "childish" and "greedy," and the dispute reached such a head that the two family factions held separate ancestral memorial services last year.

Balance is essential for Lee to maintain control

The financial wrangling between various subsidiaries of Samsung Group is complex and circuitous, but ultimately centers around the status of Samsung Everland; ostensibly a theme park side venture for Samsung, it's actually a de facto holding company for the group. Lee Kun-hee's stake in Samsung Life, the insurance company, is crucial — if Everland takes a bigger stake in Life than Lee keeps, it's thought that it would cross the threshold for being considered a holding company under Korean law, and Samsung Group would then have to sell off shares. The balance between the varying divisions is therefore essential in order for the Lee dynasty to maintain control of Samsung.

As Korea's richest man, with a personal wealth estimated at $8.3 billion by Forbes, losing this case wouldn't have meant financial ruin for the 71-year-old Lee Kun-hee — nor would it have significantly loosened his grip on Samsung Group. But a ruling against him could have undermined his leadership, with potential implications for his son and successor apparent Lee Jae-yong. In the end, the judge's decision to side with Lee Kun-hee seems likely to secure the status quo at Samsung until the chairman steps down.

Hyunhu Jang contributed to this report.

The Verge
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