Court acquits SPC Chairman over stock dumping allegations

SPC Group Chairman Hur Young-in has been cleared of charges related to instructing the sale of affiliate shares to evade gift taxes in the first trial.

SPC Group Chairman leaves Seoul Central District Court in Seocho District, southern Seoul, on Friday after the Seoul court acquitted on charges of ordering the sale of affiliate company stocks at a low price to avoid gift tax. [YONHAP]

SPC Group Chairman Hur Young-in has been cleared of charges in the first trial related to instructing the sale of affiliate shares at a lower price to evade gift taxes.

The Seoul Central District Court on Friday declared Chairman Hur not guilty of breach of trust charges, citing insufficient evidence to determine that the pricing of the disposed shares constituted a breach of duty. Former SPC Group CEO Cho Sang-ho and SPC CEO Hwang Jae-bok, who were jointly on trial, were also acquitted.

A second trial is likely to take place after the prosecution said Friday afternoon that it will appeal the verdict of the Seoul Central District Court.

Hur faced accusations of selling Mildawon stocks, a grain company wholly owned by his family, at a significantly lower price of 255 won ($0.19) per share in December 2012. This price was lower than the estimated 2011 value of 1,180 won or the 2008 acquisition price of 3,038 won. The stocks were held by SPC affiliates, Paris Croissant and Shany, during a December 2012 sale to SPC Samlip, the sole publicly listed entity of SPC.

Mildawon, responsible for producing and supplying flour to SPC affiliates via Samlip, created a structure that would have subjected Hur to a transfer tax of 7.4 billion won over the following decade if the stock sales had not occurred.

Prosecutors alleged that the stock dealings caused damages of 5.81 billion won to Shany and 12.16 billion won to Paris Croissant, while providing Samlip with proceeds of 17.97 billion won.

However, the court stated on Friday that determining the transfer share price is unrelated to avoiding gift taxes.

Regarding the prosecution's claim that Hur and others "significantly undervalued" shares, the court highlighted the inherent difficulty in predicting the growth of the grain processing industry and subjective elements in valuing future potential, making it challenging to accept the allegation.

Following the trial, Hur expressed his gratitude and said: "I appreciate the court for dispelling misunderstandings and addressing the unfairness."

This court ruling comes after the Seoul High Court's decision on Jan. 31 to cancel the 64.7 billion won fine imposed by the Fair Trade Commission on the Korean bakery and beverage giant.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]