Prosecutors Demand 5-Year Prison Sentence for SPC Group Chairman Over 'Low-Price Stock Transfer'

Seoul Central District Court Criminal Division 24 Deliberation Hearing

The prosecution requested a 5-year prison sentence for Heo Young-in, chairman of SPC Group, who was indicted on charges of instructing the transfer of affiliate company stocks at low prices to evade gift tax.

On the 8th, at the sentencing hearing of Chairman Heo held under the Criminal Division 24 of the Seoul Central District Court (Presiding Judge Choi Kyung-seo), the prosecution argued that Heo only considered the benefits of the controlling family. Former SPC Group General President Cho Sang-ho and SPC CEO Hwang Jae-bok, who were indicted together, were each sentenced to 3 years in prison.

The prosecution stated, "The defendants, as senior executives responsible for management, violated their duties by selling Milda One stocks at prices significantly lower than past appraised values or objective exchange values, causing financial damage to Paris Croissant and others," adding, "They provided financial benefits to Samlip and only considered the gains of the controlling family."

Seoul Central District Court, Seocho-gu, Seoul. Photo by Jinhyung Kang aymsdream@

They continued, "Chairman Heo operates multiple corporations with enormous responsibility but privatized profits by arbitrarily disposing of stocks," emphasizing, "The defendants violated their obligation to properly manage the assets of the victim companies."

Chairman Heo and others were indicted in December 2022 on charges of breach of trust under the Specific Economic Crimes Act for selling Milda One stocks held by Paris Croissant and Shani to Samlip at prices significantly lower than the acquisition cost (3,038 won in 2008) or the previous year's appraisal value (1,180 won) in December 2012.

The prosecution judged that this transaction caused damages of 5.8 billion won to Shani and 12.16 billion won to Paris Croissant, respectively.

This transaction was intended to avoid an annual gift tax of 800 million won imposed on the controlling family if the stocks were not sold, and the prosecution concluded that Chairman Heo saved 7.4 billion won over the past 10 years.

In response to the prosecution's claims, Chairman Heo's defense attorney argued, "There is no connection between evading gift tax and transferring stocks at low prices," and "Breach of trust presupposes a benefit to oneself, and it is impossible for breach of trust to be an issue when a sale results in a loss."

Regarding the circumstances of the Milda One stock sale, the defense stated, "The sale procedure was carried out to avoid being stigmatized as a company engaging in internal transactions," and argued, "The prosecution's claim that selling at 1,595 won would yield over 20 billion won in profit and that the sale was made to save several hundred million won in gift tax is unreasonable."

The defense also questioned the timing of the prosecution's indictment, which came immediately after a worker's death accident at an SPC affiliate factory.

In his final statement, Chairman Heo said, "I have always prioritized making good bread throughout my life and entrusted all management-related matters to professional managers to ensure proper operation," adding, "However, I feel deeply sorry to stand in court again due to the renewed issue of the Milda One stock transfer from long ago."

He continued, "On the other hand, it pains me to think that misunderstandings about us might lead to negative evaluations of the company," and said, "I consider all of this my own fault and will strive to make the company one that earns trust and love from the public."

The sentencing hearing for Chairman Heo and others is scheduled for the 2nd of next month.