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Probe starts into 2015 disclosures by Elliott

May 04,2018
Prosecutors resumed their investigation into Elliott Management and whether it violated public disclosure rules, escalating tensions between the activist American hedge fund and the Korean government.

The probe by Seoul’s Southern District Prosecutors’ Office, announced late Wednesday, will look into whether the fund abided by the capital market law in 2015 when it raised its stake in Samsung C&T from 4.95 to 7.12 percent. The law requires a company to announce its holdings on an electronic disclosure system within five days of an acquisition if the combined amount is more than 5 percent of a stock.

A controversial 2015 merger between Samsung C&T and Cheil Industries is in focus as the New York-based hedge fund began taking steps to sue the Korean government over its role in the deal.

Elliott denied the nondisclosure allegation on Thursday, implying that the move was politically motivated.

“With regards to press articles concerning the investigation by the Seoul Southern District Prosecutors’ Office (PPO), Elliott used swaps lawfully and in a manner consistent with Korean law,” a spokesperson for Elliott said in a statement.

“As a foreign investor in the Republic of Korea (ROK),” it said, “Elliott notes with concern that details of a confidential and long-dormant investigation were suddenly leaked to the press just hours after Elliott confirmed that it is seeking compensation relating to the unlawful intervention by the former administration and the National Pension Service in the merger of Samsung C&T and Cheil Industries.”

The Financial Supervisory Service, the country’s financial watchdog, probed the allegation in 2016 and reported the result to the Financial Services Commission (FSC). Then the FSC’s Securities and Futures Commission filed a complaint with the prosecution in February 2016.

The resumption of the probe appears to be sparked by Elliott’s move to sue the Korean government over the Park Geun-hye administration’s role in the mega-merger. Elliott had not approved of the Samsung C&T-Cheil Industries merger.

Elliott assumes that the Park administration pressured the National Pension Service (NPS) to vote for the merger in an alleged collusive tie between the administration and Samsung Group.

That suspicion surfaced with the outbreak of the influence peddling scandal involving the president and her confidante Choi Soon-sil, which led to Park’s impeachment and removal.

Elliott claims that court rulings back its belief that the former government intervened on behalf of the merger, causing it damages given that the merger undervalued Samsung C&T shares.

“The scandal that unfolded around the merger has led to the impeachment and removal of then-President Park, as well as a number of criminal trials and convictions in ROK domestic courts, including those of senior Samsung Executives, the former Minister of Health and Welfare, and the former Chief Investment Officer of the NPS,” the spokesperson said.

Still, it is a subject of dispute whether recent court rulings totally prove Elliott’s stance since a ruling for Park Geun-hye last month rejected a bribery charge for Samsung.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]