Representative Lee Yeon-seok of Jogwang Leather Converts Nominee Stocks to Real Name... Hidden Shares for 5 Years

Capture of Jogwang Leather homepage.

[Asia Economy Reporter Jang Hyowon] Lee Yeon-seok, CEO and controlling shareholder of Kogwang Leather, a KOSPI-listed company, has revised all business reports for the past five years after converting stocks he held under a borrowed name into his real name. Kogwang Leather has been in a long-standing dispute with general shareholders led by Park Young-ok, CEO of Smart Income, who is famous as a "stock farmer," and the disclosure of the CEO’s borrowed-name stocks is expected to spark controversy.

According to the Financial Supervisory Service’s electronic disclosure on the 19th, Kogwang Leather corrected 20 quarterly, semi-annual, and business reports from the quarterly report as of the end of September 2017 to the semi-annual report as of the first half of this year. The period covers about five years.

The correction concerns changes in shareholding ratios due to the real-name conversion of borrowed-name stocks previously held by CEO Lee Yeon-seok. Until now, Lee was disclosed as holding 726,680 shares (10.93%), but he newly converted 269,479 shares into his real name this time. Accordingly, it was revealed that Lee has held 996,159 shares (14.98%) so far.

Lee Yeon-seok is the son of Ji Gil-soon, chairman of Kogwang Leather. The Ji family has disclosed holding a total of 26.24% of management rights shares, including Chairman Ji Gil-soon’s 9.62% and his son Lee Hong-seok’s 5.69%. However, with the real-name conversion of Lee Yeon-seok’s borrowed-name stocks this time, the shareholding ratio was found to be 30.29%.

Furthermore, Lee was revealed to be the largest single shareholder of Kogwang Leather. Until now, Park Young-ok, CEO of Smart Income and known as a "stock farmer," was disclosed as the largest single shareholder. Park has steadily purchased Kogwang Leather shares since 2007 and held 981,105 shares (14.76%) as of the 11th of last month.

With the disclosure of Lee’s borrowed-name stocks this time, Kogwang Leather is expected to fall into turmoil. Since 2020, Park and other minority shareholders have actively engaged in shareholder activism, including shareholder proposals to Kogwang Leather. Park and others have demanded the cancellation of treasury shares amounting to 45.2%, expanded dividends, and prohibition of executives’ private profit-taking.

Additionally, 13 minority shareholders including Park filed a damages lawsuit against CEO Lee Yeon-seok and 10 board members. They claim that Lee caused damages amounting to about 125 billion KRW over seven years by diverting Kogwang Leather’s work to "Kogwang Co., Ltd.," a company he established, thereby appropriating private profits.

In fact, at the recent regular shareholders’ meeting, Park and others proposed the appointment of outside directors and non-standing directors. However, they lost the vote, and all the personnel proposals suggested by Park were rejected. Until then, Lee’s borrowed-name shares exceeding 4% had not been disclosed.

Regarding this, a Kogwang Leather official said, “This is a personal matter of the CEO, so the company has no position to announce.”

Meanwhile, due to the real-name conversion of CEO Lee Yeon-seok’s borrowed-name stocks, Kogwang Leather is expected to undergo investigations by the National Tax Service and financial authorities. In the past, Chairman Lee Myung-hee of Shinsegae, Chairman Kim Ho-yeon of Binggrae, and Chairman Seol Beom of Daehan Textile were investigated by authorities after converting borrowed-name stocks into real names.