Shameful Dispute

 

The conflict between the brothers of the Kumho Asiana Group has started again. The Seoul Supreme Prosecutors’ Office announced on Sept. 3 that Park Chan-gu, chairman of Kumho Petrochemical, has sued his older brother Park Sam-gu, chairman of Kumho Asiana Group, for a “breach of duty” to the tune of 400 billion won (US$386 million).

Kumho Petrochemical claims that Chairman Park Sam-gu caused financial harm to the company by issuing 420 billion won (US$405 million) worth of commercial paper (CP) for Kumho Industrial and Kumho Tire and forcing 12 affiliate companies, including Kumho Petrochemical, to buy the CP. After the issuance, Kumho Industrial and Kumho Tire filed for a corporate workout. The credit rating of the CP that Kumho issued dropped to a C as well, which inflicted serious financial losses on everyone involved.

The Prosecutors’ Office plans to name Chairman Park Chan-gu as a plaintiff and investigate the accusation and related data. Depending on the results of the investigation, Chairman Park Sam-gu might be summoned as well. The emotionally-charged conflict between brothers might become more intense.

Park Sam-gu and Park Chan-gu are the third and fourth sons, respectively, of the late Chairman Park In-cheon, founder of the Kumho Group.

Chairman of Kumho Petrochemical Park Chan-gu, left, and Chairman of Kumho Asiana Group Park Sam-gu, right.

Previously, Park Sam-gu sued his younger brother, Park Chan-gu, and an appellate judgment is still currently in progress. Park Chan-gu was indicted by his older brother for selling Kumho Group stocks in advance using insider information while selling off Daewoo E&C in 2011, thereby violating the Capital Markets Act. At the first trial, Chairman Park Chan-gu was found guilty only of a “breach of duty” and sentenced to two and a half years in prison and four years of probation.

This so-called “brothers' rebellion” in the Kumho family started in 2009 when the two brothers expressed different opinions on an M&A of Kumho Asiana with Daewoo E&C and Korea Express. The two brothers fought for management rights over the possible M&A, and at one time both of them were forced to quit their positions because of the feud.

Kumho Asiana Group currently consists of Kumho Industrial, Asiana Airlines, and Kumho Tire, after selling off Daewoo E&C and Korea Express, which the group had only recently acquired. Kumho Industrial is the major company in the group, and Chairman Park Sam-gu and his son Executive Managing Director Park Sae-chang hold equity in it. Shares of Kumho Tire are also owned by Chairman Park Sam-gu and Park Sae-chang, who is vice president of that company as well.

Chairman Park Chan-gu has been independently running Kumho Petrochemical after disposing of most of his shares in other Kumho affiliate companies around 2010.

Since the Prosecutors’ Office conducted a search and seizure of Kumho Petrochemical for raising secret funds in 2011, the two parties unceasingly slander and accuse each other about the reasons for the strict investigation, which worries many experts in the business world.

One worried businessperson pointed out, “Due to the chronic recession, the government is trying everything to revive the economy. In this situation, conflicts of conglomerate families over management rights could cause harmful effects to the national economy.”

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