Prosecutors Indict Sampyo Chairman for Unfair Support of Eldest Son's Company

74 Billion Won Provided to Facilitate Family Succession Structure
"Strict Response to Illegal Favoritism Among Affiliates"

Sampyo Group Chairman Jung Dowon (78) has been indicted on charges of unfairly supporting a company operated by his eldest son in connection with succession of management control. Prosecutors stated, "We will prosecute all cases of illegal succession structures involving business conglomerate families without exception."

Sampyo Group Corporate Image (CI). Provided by Sampyo Group

On November 4, the Fair Trade Investigation Division of the Seoul Central District Prosecutors’ Office (headed by Prosecutor Na Heeseok) announced that Chairman Jung has been indicted without detention for violating the Fair Trade Act and for breach of trust under the Act on the Aggravated Punishment of Specific Economic Crimes.

In addition, Hong Seongwon (69), former CEO of Sampyo Industry, who had already been indicted last year for violating the Fair Trade Act, has now also been charged with breach of trust.

According to the prosecution, Chairman Jung, in collusion with former CEO Hong, is accused of unfairly providing about 7.4 billion KRW (approximately 7.4 billion won) in support to SP Nature, where his eldest son Jung Daehyun, Senior Vice Chairman of Sampyo Group, is the largest shareholder.

SP Nature is a company that supplies "powder" used in ready-mixed concrete manufacturing. From January 2016 to December 2019, Sampyo Industry purchased raw materials from SP Nature at prices 4% higher than those paid to non-affiliated companies.

As a result, SP Nature experienced rapid growth without competition, with significant increases in sales and operating profit. Prosecutors determined that this enabled the company to secure funds needed for management succession, such as capital for paid-in capital increases.

A prosecution official stated, "Chairman Jung arranged for his eldest son to control a highly profitable 'cash cow' business and transferred profits by having affiliates purchase raw materials at inflated prices."

Within Sampyo Industry, as losses mounted due to these unreasonable transactions, employees protested. However, the investigation found that Chairman Jung and former CEO Hong did not stop the support.

Previously, in August last year, the Fair Trade Commission reported Sampyo Industry to the prosecution for violating the Fair Trade Act. Following searches and questioning of those involved, prosecutors concluded that the unfair support played a direct role in shaping the succession structure, going beyond mere internal transactions, and decided to indict.

The prosecution emphasized, "We will strictly crack down on the practice of funneling work between affiliates to facilitate illegal succession of management control by business conglomerate owners. Regardless of social status or economic influence, anyone who undermines fair competition will be held accountable."

However, the eldest son, Senior Vice Chairman Jung, was excluded from this indictment. Prosecutors explained that while the Fair Trade Act provides punishment provisions only for the party providing the support, there are no separate penalty clauses for the recipient of support.

They further explained that, in the case of breach of trust, the law only recognizes an accomplice if the beneficiary is directly involved in all aspects of the crime, which set a legal limitation in this case.