'Deutsche 2nd Trial Verdict' Mrs. Kim's Recording: "It Was Signed... How Much Time Is Left?"

Transcript of Call with Securities Firm Employee
Evidence of Account Transactions Used for Stock Price Manipulation Recognized

The appellate court ruling on the Deutsche Motors stock manipulation case confirmed that First Lady Kim Geon-hee was involved in the stock transactions by receiving reports and other means.

[Image source=Yonhap News]

According to the legal community on the 13th, the Seoul High Court Criminal Division 5 (Presiding Judges Kwon Soon-hyung, Ahn Seung-hoon, Shim Seung-woo) issued a verdict the previous day finding all defendants, including former chairman Kwon Oh-soo, the main perpetrator of the Deutsche Motors stock manipulation, guilty. The ruling included circumstances indicating that First Lady Kim Geon-hee received reports regarding the stock transactions.

The court specified that three of Kim’s accounts were used for market manipulation, mentioning a recorded phone conversation on October 28, 2010, between a Daishin Securities employee and Kim Geon-hee concerning transactions in her Daishin Securities account.

According to the recording, the Daishin Securities employee said, "Yes, Professor. I sold those 100,000 shares," and "Someone is buying them." Kim replied, "Ah, the trades were executed, right?" The employee then said, "Yes, it looks like Taurus is buying them," to which Kim asked, "Then, how many are left?" When the employee responded, "There are 80,000 shares left," Kim questioned, "No, I mean, what about the remaining amount?"

Regarding this, the court judged, "Kim only confirmed the transaction results and amounts retrospectively or was being reported to by the securities firm representative. There is no indication, as claimed by former chairman Kwon, that the securities firm representative, entrusted by Kim, was trading stocks based on their own judgment." The court presented the recording as evidence rejecting Kwon’s claim that the trades were not conducted under Kim’s instructions and recognized that the accounts were used for market manipulation. This also implies that Kim was sufficiently aware of the transactions in the Daishin Securities account, which were acknowledged as being used for market manipulation during the second stock manipulation period (after October 21, 2010).

However, merely knowing about the transactions does not determine guilt. In the case of Son Mo, the 'money master' who was convicted in the second trial for aiding market manipulation, the court found that "Son purchased tens of billions of won worth of Deutsche Motors stocks while at least implicitly aware of former chairman Kwon’s stock manipulation crimes." By this standard, for Kim to be charged with aiding market manipulation, it must be proven that she was aware not only that her accounts were used for manipulation but also of the manipulation itself.

The second trial court’s judgment that Kim’s Daishin Securities account was a case where she entrusted investment decisions to former chairman Kwon is also a point to consider. The court explained, "The trades were conducted under the involvement of former chairman Kwon and others, and the securities firm representative merely submitted orders according to their instructions." Earlier, the Presidential Office stated after the first trial ruling, "It is clear that being 'induced to buy' or having an 'account utilized' does not mean participation in stock manipulation."

The prosecution, which postponed the decision on whether to indict Kim until after the Deutsche Motors second trial ruling, is expected to focus its investigative efforts on clarifying this matter based on the investigation so far.