Court, “Three of Kim Keon-hee’s Accounts Were Used in Second Market Manipulation Scheme” - 경향신문

First lady Kim Keon-hee attends a New Year’s greeting for foreign missions in Korea at the Cheongwadae state guest house on January 31. Courtesy of the Office of the President

On February 13, the court overseeing the market manipulation of Deutsch Motors concluded that a number of first lady Kim Keon-hee’s accounts, mentioned several times in the ruling, were “used to manipulate market prices.” The court acknowledged that Kim’s accounts were used during the so-called “second scheme,” for which the statute of limitations is still valid. Thus, the latest court decision supports voices calling for an investigation into the first lady’s involvement in the market manipulation.

Criminal Agreement Division 23 (Head judge: Jo Byeong-gu) of the Seoul Central District Court judged each act involved in the market manipulation by the defendants including Kwon Oh-soo, former chairman of Deutsch Motors, and ruled that some of first lady Kim Keon-hee’s accounts were linked to the second market manipulation scheme, which took place after October 2010.

For instance, the court thought that Kim Keon-hee’s account was used when Kim, the “big gun” who initiated the second scheme, and Min, an executive at Black Pearl Investments, manipulated share prices in November 2010. The bench announced, “The transactions and the days when the transactions occurred were not frequent, but we recognized that when those transactions did occur, the account in question (Daeshin Securities account) was used to manipulate the market according to the intentions of the defendants.”

During the trial, it was revealed that Kim, the “big gun,” had texted Min, “Sell 80,000 shares for 3,300 won (each),” and seven seconds later, Kim Keon-hee’s account put 80,000 shares up for sale. The judge said, “We cannot confirm who personally placed the order from the account in question,” but added, “When we consider the fact that they communicated through text messages and the timing when the offer was made and the transaction occurred, we could see that the account was entrusted to Kwon or another party involved in the market manipulation or it was, at least, used according to the intentions and orders of those parties.”

The prosecutor pointed out that the transactions from Kim Keon-hee’s account at the time were made through the branch terminal after Kim personally made the call and questioned the defendants if they contacted each other in the order of Kim (“big gun”) Min  Lee (“player” in the second market manipulation scheme)  former chairman Kwon  first lady Kim. The bench recognized that communication started from Kim and followed this order all the way to Kwon, but did not announce a decision on whether Kim Keon-hee was personally involved in the transactions.

Lee and Kim, who led the second scheme, were found guilty in the first trial. Since the court ruled that Kim Keon-hee’s accounts were used in their criminal activities, it is now the prosecutors’ biggest task to uncover any involvement of the first lady in the market manipulation.

The “Kim Keon-hee file” included transactions made from the first lady’s accounts at Mirae Asset Securities and DS Investment & Securities. The court saw that these were also managed by the parties responsible for the second scheme and used in the market manipulation. The file managed by Black Pearl Investments was created in January 2011 and the transaction was made in November 2010. The court acknowledged that the statute of limitations was valid for this transaction.

The court said, “We did not find any evidence that proved that first lady Kim entrusted Lee (“player” in the first market manipulation scheme) with the management of her account after January 29, 2010,” but said, “After the second stage (when they launched the second scheme), there was a new ‘big gun’ and the method of the crime was updated. So it appears it (account) was entrusted again through Kwon.”

Such views reflected in the first ruling contradict the explanation that President Yoon Suk-yeol gave in the past. During his presidential campaign, Yoon argued, “Kim Keon-hee entrusted management to Lee (‘player’ in first manipulation scheme) for four months in 2010, but after suffering losses, she withdrew her funds and ended her relationship with him.” The market manipulation mainly occurred in 2011-2012, and the president argued that Kim did not trade securities at that time. But the court recognized that Kim’s account was also involved at the time of the second scheme.

In addition, it was also revealed in the trial that an account in the name of Kim’s mother, Choi Eun-soon, was used in matched orders and wash trading. The bench believed that Kwon borrowed and used Choi’s account. As for another account under Choi’s name that the prosecutors suspected was used in the market manipulation, the court believed that Choi personally decided on the transaction after hearing information on Deutsch Motors shares from former chairman Kwon. However, the bench dismissed the charge against Kwon that he had investors including Choi purchase shares by leaking insider information (fraudulent unfair trading) claiming that the facts constituting the crime were not specified.

The ruling also stated the fact that the mother and daughter were the only people who lent their accounts to the parties involved in both the first and second market manipulation scheme. It also mentioned how the two people maintained a long and close relationship with Kwon. Kim and Choi owned Deutsch Motors shares since 2008, before the company was listed. Kim also made an investment when Kwon founded Deutsch Financial in 2011.

Voices in the legal circle claim there is a need for a proper investigation. Not all accounts used in market manipulation are subject to criminal punishment, but experts argue that authorities need to reveal the extent of Kim’s involvement through an investigation.

One attorney who served as a former prosecutor said, “If Kim was actively involved in the transactions, they may be able to prove that she conspired (in the market manipulation), but the facts revealed so far are not enough.” He added, “They need to investigate and see specifically how Kim and the employees at the securities firm handled the transactions.” Another lawyer argued that the authorities should conduct a proper investigation and punish the people responsible. She further said, “There is a need to confirm the truth through an investigation in order to clarify any misunderstanding by the public.”

One lawyer who formerly served as chief of a high prosecutors’ office said, “It is hard to know right now if it (Kim’s account) was simply brought into use, but it is true that a national question has been raised, and the people think this is an investigation into (those in) power,” and added, “It would be right for the prosecutors to quickly investigate the issue, reach a conclusion, and take responsibility accordingly.”