Lee Jae-yong Trial Witness Examination... "Project G, Governance Stability Idea Report"

Former Samsung Securities Employee Who Prepared Documents Testifies at Second Trial on the 6th

[Image source=Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] A former employee of Samsung Securities who appeared as a witness in the case involving Samsung Electronics Vice Chairman Lee Jae-yong's alleged violation of the Capital Markets Act testified in court that the 'Project G' document was "a report compiling ideas on how to respond to newly introduced regulations at the time, aimed at stably maintaining the group's governance structure and resolving issues."

The Seoul Central District Court Criminal Division 25-2 (Presiding Judge Park Jeong-je) held the second trial on the 6th for Vice Chairman Lee and others, who were indicted on charges including unfair trading practices, market manipulation under the Capital Markets Act, and breach of trust. During the trial, the court conducted witness examination of Han, a former employee in charge of corporate finance at Samsung Securities. Han stated that while working in the corporate finance team at Samsung Securities, he analyzed and reviewed issues related to Samsung Group's governance structure together with the Future Strategy Office and assisted in advisory roles, participating in the preparation of the 'Project G' report in 2012 based on this work.

The final Project G report, disclosed by the prosecution that day, analyzed the problems of Samsung Group's governance structure at the time by dividing them into five categories: △ financial-industrial conglomerate structure △ circular shareholding structure △ vulnerability in non-financial company shareholding ratios △ existence of issues related to internal transactions △ need for adjustment by business sector. It also presented corresponding countermeasures and explicitly stated the necessity for governance improvement.

The prosecution views Project G as Vice Chairman Lee's succession plan centered around the Future Strategy Office, containing content that valued Cheil Industries, in which Lee held significant shares, highly while undervaluing Samsung C&T to facilitate a merger and strengthen group control.

When asked by the prosecution about the goals Project G aimed to achieve through reviewing governance restructuring plans, Han explained, "Rather than responding to individual issues one by one, we thought of solutions from a broader perspective to maintain management rights over the group's major companies and businesses as a whole." He added, "Overall, the premise was to resolve potential management disputes caused by reductions in shares due to external issues, including major shareholder stakes, and to ensure there would be no threats to management rights by complying with regulations."

Regarding the part of the report that analyzed the vulnerability of major shareholder stakes in Samsung Electronics and Samsung C&T as one of the governance problems, Han mentioned that the 'major shareholder' in the report referred to the late Chairman Lee Kun-hee's family and emphasized that the shares of these two affiliates were core to the group. Han responded, "Samsung Electronics is naturally a core business of the group and important," and added, "Samsung C&T is also one of the core affiliates, and together with Samsung Electronics, it held shares in other financial companies and had important business operations."

The prosecution asked whether the merger of Samsung C&T and Everland was regarded as a necessary task as part of Vice Chairman Lee's succession chain, to which Han replied, "It was seen as one of the most effective methods. I never thought it was absolutely necessary." Regarding the mention in the Project G report that after the merger of Everland and Samsung C&T, the overall shareholding ratio of affiliates decreased while the group's shareholding ratio increased, the prosecution questioned whether this was intended to increase the major shareholder's stake due to difficulties in maintaining control through affiliates. Han responded, "When we reviewed it, we considered raising the overall group shareholding ratio rather than just the major shareholder's stake, and as a result, the major shareholder's stake increased."

This content was produced with the assistance of AI translation services.