Namyang Dairy Products, Embezzlement and Breach of Trust Worth 25 Billion KRW... Hong Won-sik Family Faces Consecutive Trials

Hong Loses Management Rights Dispute Against Hahn & Company
Indicted and Detained for Embezzlement and Breach of Trust Under Special Act
Wife and Two Sons Also Face Trial
First Trial for Hong to Be Held Today at Seoul District Court

Former Namyang Dairy Products Chairman Hong Won-sik and his family members are set to face criminal trials one after another. The private equity firm Hahn & Company, which holds the management rights of Namyang Dairy Products, is continuing legal actions to uncover illegal activities committed by former Chairman Hong during his tenure.

According to the Financial Supervisory Service's electronic disclosure system on the 16th, Namyang Dairy Products announced that three individuals?former Chairman Hong's wife, former advisor Lee Un-kyung, and their two sons, former executive directors Hong Jin-seok and Beom-seok?were additionally indicted on charges of violating the Act on the Aggravated Punishment of Specific Economic Crimes (breach of trust). The amount involved in their breach of trust charges is approximately 3.7 billion KRW. With this, the number of individuals prosecuted for embezzlement and breach of trust since the change in management has increased to eight, with the total amount embezzled and breached reaching 25.6 billion KRW.

Hong Won-sik, Former Chairman of Namyang Dairy Products Photo by Yonhap News

Earlier, after Hahn & Company won the management rights dispute against former Chairman Hong and took control of the company, Namyang Dairy Products filed a complaint in August last year, alleging that former Chairman Hong engaged in private misuse by inserting relatives' companies into the product distribution process.

Following the start of the prosecution's investigation, former Chairman Hong was arrested and indicted in December last year on charges including embezzlement and breach of trust under the Special Act, bribery, and violations of the Food Labeling and Advertising Act. He is accused of embezzling and breaching trust of 21.75 billion KRW by inserting pipe companies to secure living expenses for relatives and privately using luxury villas and vehicles owned by Namyang Dairy Products. He is also accused of receiving rebates amounting to 4.37 billion KRW from four of Namyang Dairy Products' suppliers and employing his cousin at a supplier company, resulting in a salary of 600 million KRW (bribery). At that time, the prosecution also indicted four others alongside former Chairman Hong, including former Namyang Dairy Products Research Director Park and former heads of the purchasing department and two former CEOs.

The conflict between former Chairman Hong and Hahn & Company dates back to May 2021. At that time, former Chairman Hong signed a Stock Purchase Agreement (SPA) to sell his 53.08% stake in Namyang Dairy Products to Hahn & Company. However, he later reversed this decision, leading to legal battles. These included a prohibition on stock disposal injunction lawsuit (August 2021), a voting rights exercise prohibition injunction lawsuit (September 2021), an injunction lawsuit to prevent the execution of the Namyang Dairy Products-Daewoo Winia agreement (January 2022), a first trial for stock transfer contract enforcement lawsuit (September 2022), a penalty lawsuit (December 2022), a second trial for stock transfer contract enforcement lawsuit (February 2023), and a third trial for stock transfer contract enforcement lawsuit (January 2024), in all of which Hahn & Company achieved complete victories.

Former Chairman Hong is the eldest son of the late Hong Doo-young, the founder of Namyang Dairy Products. He inherited the management rights around 1990 and led the company, but after losing the dispute with Hahn & Company, he appears to be in a desperate situation.

The first trial for former Chairman Hong will be held this afternoon at the Seoul Central District Court. This session is a preparatory hearing to organize issues and evidence before the main trial begins. The defendant is not required to attend, so former Chairman Hong is expected not to appear in court.

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