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    Samsung accused of $64m art fraud

    Date: 4 Jan 2008 | | Views: 5199

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

    Source: The Art Newspaper (www.theartnewspaper.com), by Lucian Harris

    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.

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