Samsung signed suspicious deal with company established by Choi
After becoming the president company of the Korea Equestrian Federation in March last year, Samsung Electronics, one of the world’s largest technology companies, signed a contract with Core Sports International GmbH, a business created by Choi in August last year. The contract said Core Sports will work on behalf of Samsung Electronics’ program to support Korean equestrian athletes’ preparations for the Asian Games and World Equestrian Games in 2018.
According to a copy of the consulting contract obtained by the JoongAng Ilbo, Samsung promised financial support for athletes, to be selected by Core Sports. Samsung was to pay for the expenses to purchase horses and equipment, conduct overseas training and participate in international competitions. The cost of overseas living for the athletes was also covered by the contract.
The prosecution earlier investigated the deal between Samsung and Core Sports and said Samsung paid a total of 810,000 euros ($843,008) to Core Sports. While the prosecution did not say that the money was a bribe, investigators of the independent counsel, currently looking into the scandal, are trying to see if Samsung’s generosity had any other motive.
They suspect the financial support was in return for the Blue House’s influence on a state-run pension fund to approve on a controversial business merger last year that solidified heir apparent Lee Jae-yong’s grip on Samsung Electronics.
Choi and her daughter, Chung Yoo-ra, apparently misappropriated the money because the contract was structured in a way to assist them. Chung was a gold medalist in dressage in the 2014 Incheon Asian Games, and suspicion was raised that the tech giant financed some of Chung’s activities as an equestrian athlete, for example by buying a horse, Vitana V, reportedly worth 1 billion won ($838,574).
According to the contract, Core Sports was supposed to inform Samsung of its quarterly expense forecast and Samsung would pay the sum in advance. At the end of each quarter, Core Sports just needs to file expense reports attached with receipts to prove that it has used up all the money.
The contract also had no limit for Core Sports’ charge to Samsung. “You can say that this is a contract with no ceiling limit,” said Park Sung-kwan, a lawyer in Germany and the head of the Core Sports.
The contract also included an extraordinary clause governing Core Sports’ commission charge to Samsung. “Core Sports will receive 10 percent of the actual operation expense of the program as commission,” it said. “The actual operation expense means the expenses actually spent from the forecast budget.”
This means that the more money Core Sports spends, the higher its commission will be.
“Normally, a commission fee is related to performance such as winning an award in a competition,” said a lawyer who specializes in international arbitration. “I have never seen a contract where the commission fee will grow higher when expenses grow.”
The contract also has a clause banning Core Sports from forming a similar consulting contract with another company until the end of 2018 without Samsung Electronics’ agreement. It also had a nondisclosure clause.
The JoongAng Ilbo also reported that the independent counsel team secured a detailed record of living expenses of the Choi family during their stay in Germany last year, and Choi got all her living expenses from the contribution Samsung Electronics later offered to Core Sports.
The newspaper said the expense report showed that Choi and Chung charged Samsung even for the small expenses, including the costs of raising their pets. A Samsung Electronics spokesman told the Korea JoongAng Daily that it never received the Choi family’s expense reports from Core Sports.
BY SONG SEUNG-HWAN, SER MYO-JA [firstname.lastname@example.org]