Did Roh Tae-woo's 30 Billion Won Grow SK... Key Issues in the 'Divorce of the Century' Supreme Court Appeal

Complex Calculations of Slush Funds and Gifts

The final ruling on the divorce lawsuit between Chey Tae-won, chairman of SK Group, and Noh So-young, director of Art Center Nabi, has been escalated to the Supreme Court.

The astronomical property division amounting to 1.3808 trillion won in the appellate court ruling was based on the court's judgment that Director Noh significantly contributed to the accumulation of assets, making this issue a key point of contention in the Supreme Court appeal.

In particular, the claim that the slush fund of former President Noh Tae-woo, Director Noh's father, flowed into the hands of former SK chairman Chey Jong-hyun, father of Chairman Chey, was recognized as fact. It is expected that the Supreme Court ruling will focus on whether the slush fund's contribution to SK's growth should be included in the property division.

According to the legal community on the 3rd, the Family Division 2 of the Seoul High Court (Presiding Judge Kim Si-cheol) acknowledged the claim that the '300 billion won slush fund' of former President Noh Tae-woo, Director Noh's father, was transferred to former Chairman Chey Jong-hyun, Chairman Chey's father. The court stated, "Considering the marriage period and the process of asset formation, the defendant's (Director Noh's) contribution to SK shares is recognized, so it qualifies as marital property and (the shares) are subject to property division."

The slush fund, which was not recognized in the first trial but became a turning point in the appellate trial, was supported by important evidence in the form of memos written by Director Noh's mother, Kim Ok-sook. Ms. Kim wrote two memos in April 1998 and February 1999 regarding the slush fund created by former President Noh, both of which mentioned "Seonkyung 30 billion won."

The court judged that the funds from former President Noh flowed into former Chairman Chey Jong-hyun and influenced the increase in SK's corporate value. Furthermore, it was considered that former President Noh's "intangible contribution" also played a role in SK's acquisition of Pacific Securities and entry into the mobile telecommunications business.

However, Chairman Chey's side denies receiving any money from former President Noh and argues that former Chairman Chey Jong-hyun mobilized affiliate funds for acquisitions such as Dongyang Securities.

Additionally, SK Group was selected as the second mobile telecommunications private operator in August 1992 during the Noh Tae-woo administration, but due to allegations of preferential treatment, the business rights were returned after just one week. SK's entry into the mobile telecommunications sector occurred later, after the inauguration of President Kim Young-sam.

A business community official said, "Whether the father's 'contribution' can be considered the daughter's contribution remains an unresolved issue," adding, "It is also difficult to measure how much the slush fund inflow contributed to the group's growth."

[Image source=Yonhap News]

Chairman Chey's side stated, "There is no evidence whatsoever, and the judgment is based solely on vague speculation, so it is completely unacceptable. Rather, SK provided various resources under pressure from the in-laws and has supported Director Noh's side for a long time."

In the Supreme Court, the subject of property division is also expected to be a key issue. Depending on whether the SK shares held by Chairman Chey are considered his separate property or marital property subject to division, the amount to be divided could change significantly.

Generally, separate property acquired by one spouse in their name during the marriage is excluded from property division. The first trial court judged that the SK shares held by Chairman Chey originated from shares in SK affiliates gifted or inherited from his father, former Chairman Chey Jong-hyun, and thus were separate property not subject to division.

However, the appellate court included SK shares in the division, ordering Chairman Chey to pay 1.3808 trillion won, equivalent to 35% of his total assets of 4.0115 trillion won, to Director Noh. This included not only the SK shares held by Chairman Chey but also approximately 1 trillion won worth of SK shares gifted to 23 relatives in 2018, all considered subject to property division. If the Supreme Court recognizes this, Chairman Chey will have to pay additional money to Director Noh for the shares distributed to relatives.

Meanwhile, Chairman Chey's legal representative stated on the 30th of last month after the appellate ruling, "There is no evidence of slush fund inflow or any tangible or intangible benefits, and the judgment is based solely on vague speculation, so it is completely unacceptable," adding, "We plan to correct the erroneous parts through an appeal."