[Q&A] Choi Tae-won Side: "Stock Value Assessment Error Is Not a Reason for Correction... Property Division Amount Will Be Significantly Reduced"

SK, Chairman Chey Tae-won's Appeal Trial Press Conference
"Contribution to Stock Value Increase, Minimum 10x Error"

On the morning of the 17th, the SK Supex Council held a session at the Supex Hall of the SK Seorin Building in Jongno-gu, Seoul, to explain recent trial issues and disclosed a 'serious error' found in the appellate court's ruling.

Lee Dong-geun, a lawyer from the law firm Hwawoo and legal representative of Chairman Choi, stated, "The appellate court made a serious error in valuing the shares of Daehan Telecom that Chairman Choi acquired in 1994." The core of the error lies in the miscalculation of the stock value, which led to an excessively inflated assessment of the contribution of Noh So-young, director of the Art Center Nabi, in supporting the family.

This error arose because the court calculated the value of Daehan Telecom (now SK C&C) shares at 100 KRW per share, ignoring the fact that the stock had undergone two stock splits, which would have made the value 1,000 KRW per share in 1998. The appellate court judged the contributions of the late Chairman Choi and Chairman Choi as 12 times and 355 times respectively, but applying the 1,000 KRW stock value, the actual figures would be 125 times and 35.5 times.

The basic framework for determining the cause of the increase in stock value by the court divides the period around the death of the late Chairman Choi in 1998 into the management periods of the late Chairman and Chairman Choi. Since the growth in stock value from 1998 to 2009, when SK Co., Ltd. was listed, is considered to have been contributed to by Noh's support, the greater Chairman Choi's contribution to the stock, the larger the proportion of assets allocated to Noh.

Below is a summary of the Q&A session held on-site that day.

Choi Tae-won, Chairman of SK Group, is expressing his position on recent trial issues at the SK Seorin Building in Jongno-gu, Seoul on the 17th.
[Photo by SK]

What is the biggest problem with the appellate court ruling, and what points do you plan to clarify in future trials?

(Choi Tae-won, Chairman of SK Group) I have heard there is a fatal error. The lawyer will explain this part, so please listen and judge accordingly. Accepting the idea that our SK Group grew through slush funds or someone's backing is neither a matter of pride for all nor a historical fact. Please understand that we have no choice but to appeal to correct this.

Given the enormous amount (1.3808 trillion KRW) of asset division in the appellate ruling, there are many talks about hostile mergers and acquisitions (M&A) or hedge funds strengthening management rights. What are your thoughts on this?

(Choi Tae-won, Chairman of SK Group) We have overcome many crises beyond trials. Therefore, I believe we have the capability to resolve this current challenge or issue. While there may be a need to prevent it from escalating into a hostile M&A crisis, even if such a situation arises, I believe we have the capability to fully block it. So, I think there is no need to worry.

There is growing social controversy, including a bill proposed in the National Assembly regarding 30 billion KRW in slush funds. What is SK's position on whether the 6th Republic slush funds actually existed and whether this money was used for corporate acquisitions?

(Lee Hyung-hee, Chairman of SK Supex Council Communication Committee) No one currently alive has seen or heard anything about the 30 billion KRW. If this is true, I believe the party making the claim must provide proof. It seems difficult to prove this on an individual basis. If there is a separate procedure, I think it is necessary for both sides or the parties involved to provide more objective and official clarifications.

SK claims that memos, tangible and intangible contributions from the 6th Republic period, and the group's growth history have not been concretely proven and are severely distorted. However, legal circles interpret that since the Supreme Court's review is legal in nature, the facts found in the second trial are generally accepted. What is your position on this?

(Lee Dong-geun, legal representative of Chairman Choi) The Supreme Court is a court of law and judges legal principles. However, in recognizing facts, it must judge based on evidence and examine whether the evidence is proper. The principle of ex officio investigation means the court investigates facts on its own authority. Even according to Supreme Court precedents, if the facts differ, it is grounds for reversal. We will examine whether there were parts where facts were inferred or presumed without evidence in this case. Also, regarding the fatal error, it is Supreme Court doctrine that if the division ratio changes, it is grounds for reversal. Therefore, we will argue whether there was illegality in the evidence assessment, whether the facts change if the evidence assessment was wrong, and whether the property division ratio can change based on the current facts.

There seemed to be no separate explanation about other errors besides the fatal error mentioned today. Are these the only errors found so far? Also, when exactly will the appeal be filed?

(Lee Dong-geun, legal representative of Chairman Choi) The fatal error mentioned today is objective and clearly wrong, so it was mentioned first. Other reasons will be precisely argued during the appeal trial. I think it is somewhat inappropriate to explain everything at this session. The deadline for filing the appeal is originally this Friday (the 21st). We plan to file it soon.

If corrected, there may be cases where SK shares are excluded from the division target. How much do you expect the asset division to decrease?

(Lee Dong-geun, legal representative of Chairman Choi) It is difficult to predict the trial conclusion immediately. According to the appellate ruling, the value of SK shares alone is 3 trillion KRW, and including SK Siltron shares, it is 3.7 trillion KRW. However, if SK shares worth nearly 3 trillion KRW are considered assets contributed significantly by the late Chairman Choi and thus owned by Chairman Choi, it will be judged as in the first trial. If, as in the appellate trial, the couple jointly maintained and contributed to the SK shares, the contribution of the late Chairman Choi must be excluded, so a much larger portion will be deducted. Then, even if the division ratio in the appellate ruling is maintained, the amount will decrease, and if SK shares are excluded from the division target, the amount will decrease significantly.

Could you explain in more detail how the serious error announced today will affect the third trial?

(Lee Dong-geun, legal representative of Chairman Choi) As mentioned earlier, the value of Daehan Telecom shares was calculated at 100 KRW instead of 1,000 KRW. This led to a structure where the late Chairman Choi's contribution to SK share value formation was considered small, and the contribution was attributed solely to Chairman Choi. Therefore, Noh's contribution was recognized, and the assets to be divided were formed close to 3 trillion or 3.7 trillion KRW. If this error is corrected, these assets would be considered received from the late Chairman Choi, causing a serious problem in the ruling. Additionally, there is a system called correction of judgment, which allows fixing simple calculation or expression errors immediately. However, if the reason affects the substance of the judgment, it is not a correction reason. In this case, the error of viewing 1,000 KRW as 100 KRW led to judging Chairman Choi as a self-made second-generation chaebol and including all assets to be divided 65:35, so this is not just a numerical issue but relates to the core of the judgment.