"Golf Course Agency Fees Included": Court's Reasoning Behind Mirae Asset's Self-Dealing Judgment

The court ruled that Mirae Asset affiliates launched various support campaigns to funnel work to golf course and hotel operators owned by the chairman's family. Mirae Asset claimed that the transactions were voluntary and based on reasonable business decisions, but it was revealed that the affiliates encouraged the use of the golf course by even covering chauffeur service costs for employees. For the group affiliates, the task was to increase the operating profit of Mirae Asset Consulting, in which Chairman Park Hyun-joo's family owns more than 90% of the shares, from the early stages of the business.

Mirae Asset Headquarters, Jung-gu, Seoul Photo by Yonhap News

According to the legal community on the 12th, the Seoul High Court Administrative Division 6-2 (Presiding Judge Wi Gwang-ha) recently ruled in favor of the Fair Trade Commission (FTC) in the lawsuit filed by eight Mirae Asset Group affiliates, including Mirae Asset Securities and Mirae Asset Consulting, and Chairman Park against the FTC's corrective orders and fines. The court stated that the affiliates engaged in 'unfair support' through additional budget support, prepaid card purchases, event and advertising support, among other methods.

From 2015 to 2017, Mirae Asset Consulting, an unlisted company with a 91.86% stake held by Chairman Park's family, operated the Blue Mountain CC golf course and the Four Seasons Hotel.

The FTC stated, "By funneling work to Mirae Asset Consulting, unfair benefits were conferred to related parties such as Chairman Park," and in September 2020, imposed a total fine of 4.391 billion KRW on other affiliates. The FTC also issued corrective orders to Chairman Park and the affiliates, instructing them not to repeat the related acts.

Mirae Asset filed a lawsuit to cancel the FTC's disposition, but the court ruled that "all claims of the plaintiff are without merit."

First, the court judged that "each affiliate transacted with Mirae Asset Consulting without properly selecting business partners through market research." Within the affiliates, it was a principle to use Blue Mountain CC when using golf courses for business. Employees had to submit a written explanation if they used other golf courses, and the cost expenditure structure was set to be more inconvenient. The affiliates also transacted in various ways such as holding events and training sessions, conducting advertising, and purchasing holiday gifts. Thanks to this, Mirae Asset Capital recorded sales of 43 billion KRW. The amount of prepaid golf cards purchased by the affiliates accounted for 82.1% of total sales.

The court stated, "Sales from transactions between affiliates accounted for 23.7% of total sales, which is about twice the average internal transaction ratio of 12% among large conglomerates in South Korea," adding, "Considering that 70% of golf course sales came from a single corporate group, it is a considerably high level even taking into account that it is a 'golf course owned by an affiliate.'"

In particular, Mirae Asset Global Investments executed 75% of the corporate card expenses used at the golf course through additional budget support. The court pointed out that "it usually takes more than two hours to travel from Seoul to the golf course in Hongcheon County, Gangwon Province," and also criticized the fact that chauffeur service costs were supported when employees used the golf course. Mirae Asset Global Investments and Mirae Asset Life Insurance withdrew their lawsuits during the trial but were summarily prosecuted and received summary orders for fines of 30 million KRW. They have currently requested a formal trial, and the court proceedings are ongoing.

Mirae Asset argued, "At the time, Mirae Asset Consulting operated the golf course and hotel and actually incurred a loss of 31.8 billion KRW. There was no 'unfair benefit' conferred to Chairman Park and others."

However, the court judged that "recording an operating loss does not mean that unfair benefits did not occur." It added, "Each transaction generated stable sales, which helped mitigate early business risks to some extent. The operating loss itself was rather the background for these inter-affiliate transactions," and "Through this, Chairman Park secured legitimacy for real estate investment and received help in reducing business losses to maintain the value of his shares."

Furthermore, the court viewed that even if Chairman Park did not directly instruct each transaction, he was 'involved' by using his influence within the group. In fact, Chairman Park showed continuous interest internally from the early stages of the golf course opening. His remarks during business promotion and management strategy meetings in 2013-2014, such as "We might be able to sell the air of the golf course later. Don't people sell the air of Seoraksan? (Omitted) It would be good to build a training center," and "We need to improve the golf course more and more. Its future value will reach 1 trillion KRW," served as grounds for the FTC's corrective order disposition.

Meanwhile, the FTC stated the day before, "This is the first case where regulations related to providing unfair benefits of significant scale without reasonable consideration or comparison to related parties were applied independently without other regulations," and "The ruling has important significance in clearly presenting the criteria for judging work-funneling."

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