Monday, January 21, 2008

Samsung accused of $64m art fraud

might pertain China one day...
Samsung accused of $64m art fraud

The conglomerate's former house attorney alleges that the chairman
set up a slush fund which his wife used to buy art

Lucian Harris | 2.1.08 | Issue 187

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LONDON. Over $64m from a slush fund set up by Lee Kun-hee, chairman
of Samsung, was allegedly used to buy art for his wife Ra Hee Hong
Lee who is director-general of the Leeum, Samsung Museum of Art,
according to the Korean corporation's former house attorney. None of
the art has been exhibited in Korea and its whereabouts is presently
unknown. Samsung denies the allegations.

The National Assembly has now approved an independent investigation
into the affair. With Samsung's huge financial sponsorship of the
arts under scrutiny, many other Korean corporations have ceased
buying art until the waters settle, causing confidence in the
country's art market to plummet.

In a series of press conferences starting on 29 October, Kim Yong-
chul, head of the legal department of the Samsung Group Restructuring
Office from 1997 to 2004, unleashed a slew of allegations concerning
a $225m slush fund which he claims was kept in the accounts of
various Samsung executives and administered by the Restructuring Office.

In addition to the currying of influence in political and legal
circles, Kim alleges that the slush fund was used to purchase
millions of dollars worth of art for the chairman's wife Ra Hee Hong
Lee and other members of his family.

Kim Yong-chul's allegations focused particularly on the acquisition
of Roy Lichtenstein's Happy Tears, 1964, which sold at Christie's New
York in 2002 for $7,159,500, a record price for the artist at the time.

He said that the painting was bought at the auction on behalf of the
chairman's wife by Hong Seong-won, director of the Seoul-based Seomi
Gallery, who is believed to have handled art purchases on behalf of
the Samsung group since the 1990s. He said that Mrs Hong Lee would
regularly call the Restructuring Office to ask for funds to be wired
to the Seomi Gallery for the buying of art.

To further back his claims, on 26 November Kim Yong-chul released a
full list of the art alleged to have been bought with money from the
Samsung slush fund as well as details of payments made to Christie's.
This list, seen by The Art Newspaper, details purchases of 30
paintings and photographs allegedly made at five different sales at
Christie's, New York between 2002 and 2003 with money from the slush
fund. According to this list, in one sale alone—the post-war and
contemporary art auction on 13 November 2002—over $20m was spent on
ten works including Lichtenstein's Happy Tears ($7,159,500); Barnett
Newman's, White Fire I, 1954 ($3,859,500); David Hockney's, Portrait
of Nick Wilder, 1966 ($2,869,500); Ed Ruscha's, Desire, 1969
($1,769,500); Donald Judd's, Untitled (Ten Units), 1969 ($1,439,500);
Agnes Martin's, Untitled #4, 1980 ($1,054,500); and Gerhard
Richter's, Abstract, 1992 ($1,054,500). When the sale continued the
following morning a further $1.3m was spent on seven more paintings.

The document also details a series of 57 staggered payments made by
15 different companies between January 2002 and December 2003. Of
these, 33 were made by Seomi Gallery through banks in Seoul and New
York, while other payments were made by finance and property
companies through banks in Seoul, Hong Kong, Singapore and London.
Between 3 and 10 December 2002, over $6m was paid from ANNC Co Ltd
through two different Korean banks.

Samsung categorically denies the allegations. In a statement to The
Art Newspaper the company said: "These allegations are completely
groundless. We are cooperating fully with the current investigation."

"We understand the document that Mr Kim disclosed is a list of works
of art purchased by Seomi Gallery. Neither Mrs Hong Lee nor Samsung
Museum of Art purchased Roy Lichtenstein's Happy Tears."

"Mrs Hong Lee was invited to view the work but she decided not to
purchase it. Mrs Hong Lee has never misappropriated funds. When she
purchases works of art, she does so with her own funds. When Samsung
Museum of Art purchases works of art, it uses its own funds. The 30
works of art included on the list were not purchased by Samsung, nor
Mrs Hong Lee."

Seomi Gallery did not respond to our emails asking for comment but
according to the Chosun Ilbo newspaper, when initially questioned on
26 November it said that it had sold Happy Tears to a private collector.

However the following day, Hong Seong-won, director of Seomi Gallery,
told Korean reporters that the work was still in her possession. "I
bought it to sell in Korea but I could not find a buyer," she said.
"So I kept it and I will show it after sorting out shipping,
insurance and security." She admitted buying other works on the list
and said that she had sold them to various Korean collectors.

She also said that four works by Japanese photographer Hiroshi
Sugimoto were bought for herself.

The affair has affected confidence in the Korean art market to such
an extent that within weeks of the scandal breaking the country's two
main auction houses were reporting a 20% drop in sales.

As The Art Newspaper went to press the whereabouts of almost all of
the works on Kim's list remain a mystery.


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