A high court’s very obfuscating fumble

The record $1 billion divorce case involving SK Group Chairman Chey Tae-won and his estranged wife Roh Soh-young came under scrutiny for a major error in the appellate court ruling that can jeopardize Chey’s grip over the chip-to-communications conglomerate. Chey vowed to challenge the court ruling — which earlier ordered him to pay his wife 1.38 trillion won ($1 billion) in property division and 2 billion won in alimony payment — by pointing out a serious error in the court’s estimation of the buildup in Chey’s assets.

The Seoul High Court went into a lengthy description on how Chey came to own more than 2 trillion won worth shares in SK Inc., the holding company of SK Group. The bench said that the share of Daehan Telecom, which had been 8 won per issue in November 1994 following the acquisition by SK Group, shot up to 100 won in May 1998 prior to the death of Chey Jong-hyon, the former chair and father of Chey Tae-won. The shares of SK C&C, the predecessor of SK Inc., were valued at 35,650 won by the time they were listed in November 2009 under the leadership of younger Chey.

Based on the jump in the share value, the court reasoned that the wealth of Chey family significantly grew under the younger Chey, 356 times versus 12.5 times under his father. But Chey claimed that the court misstated Daehan Telecom’s share price as “100 won” in 1998 when it was actually 1,000 won. That means the stock appreciated 125 times under Chey’s father and 35.6 times under his management. The court admitted to its folly and made a correction to the ruling.

After controversy erupted, the court released a statement advocating its ruling regardless of the miscalculation. The appeals court delivered a much severe ruling than the lower court, which ordered a property division of 66.5 billion won plus an alimony of 100 million won.

Given the gravity of the case, it should have been flawless in calculating the change in the stock prices.

The controversial case is now up to the Supreme Court. Chey highlighted his father’s role in increasing his own wealth and that his separate property is protected from property division with a spouse. Roh exposed a memo of her father, Roh Tae-woo, stating the former president left 30 billion won of his slush fund under the custody of SK to claim her father’s role in the Chey family’s accumulation of the wealth.

The math flop by judges at the Seoul High Court added to the infamy of the high-profile case involving the daughter of a former president and head of the country’s second largest conglomerate. The judiciary branch must deliberate hard on the grave mistake of the court.