[MSN] The Art Newspaper: Samsung accused of $64m art fraud

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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

By Lucian Harris | From News | Posted: 2.1.08

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.

C2008 The Art Newspaper