Two former Kakao executives indicted over acquisition of Baram Pictures

Two former Kakao executives were indicted without detention on multiple charges related to Kakao Entertainment’s 2020 acquisition of production studio Baram Pictures.

Former Kakao Entertainment co-CEO Kim Sung-soo, left, and Lee Joon-ho, former head of investment strategy at Kakao. [YONHAP]

Two former Kakao executives were indicted without detention on multiple charges related to Kakao Entertainment’s 2020 acquisition of production studio Baram Pictures.

The charges include breach of trust, bribery and violations of the Act on the Regulation and Punishment of Criminal Proceeds Concealment under the allegation that the pair colluded to inflate the purchase price of the production studio above the company’s market value for personal gains.

Lee Joon-ho, former head of investment strategy at Kakao, owned an underperforming production studio and conspired with former Kakao Entertainment co-CEO Kim Sung-soo to have the company acquire the studio, according to the prosecutors.

Lee reaped 31.9 billion won ($23.8 million) in profit, and Kim received approximately 1.26 billion won on commission.

Baram Pictures, established in February 2017, was a ghost company with no revenue, office nor employees until the period leading up to Kakao Entertainment’s acquisition.

Lee and Kim's master plan unfolded in April 2019 when they used Kakao Entertainment’s capital of 33.7 billion won to recruit writers and producers, including famed screenwriter Kim Eun-hee and her husband and film director Jang Hang-jun.

The duo then got a private equity fund to acquire the company in November 2019, and had Kakao Entertainment acquire the company for the same price between March and May 2020.

In total, Kakao Entertainment injected 73.7 billion won into Baram Pictures.

From the illegal proceeds, Lee bought a high-end apartment complex and gold bars, while Kim purchased artworks and luxury goods.

Lee is also suspected of having received over 6 billion won from another production company in 2017 for content development and using part of the sum —1.05 billion won — for his personal gains, such as buying real estate properties and paying off his loans.

Prosecutors detected the duo's unusual behavior while investigating Kakao’s alleged stock manipulation during its acquisition of SM Entertainment in February. They filed for the two former executives’ arrest warrant twice in February and March, which were both dismissed by the court.

The court claimed that it was difficult to see risk of evidence tampering or escape as “all objective evidence has been secured" and said there was room for dispute regarding the amount of damage caused by the duo.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]