ISD tribunal rejects Elliott request for prosecutorial case files on Samsung heir on M&A

The Investor-State Dispute (ISD) Tribunal has turned down U.S. hedge fund Elliott Associates’ request to access confidential files of the Korean prosecution pursuing indictment of Jay Y. Lee, vice chair of Samsung Electronics and de facto head of Samsung Group, for wrongful role in in-house M&A and IPO to facilitate his hereditary succession.

According to the update on Elliott-Korea ISD posted on the Permanent Court of Arbitration website on Wednesday, the U.S. hedge fund on June 12 requested the Korean Justice Ministry to hand over seven confidential reports from the prosecutorial probe on Lee.

They were on the indictment grounds on Lee, an in-house M&A report devised by Samsung Future Strategy Office, Samsung Biologics IPO plan, testimony from Samsung Bioepis chief financial officer (CFO), and details on special prosecutors’ appeal to the Supreme Court on overturn on bribery case on Lee in regards to the case with impeached President Park Geun-hye.

Elliott argued they would be pivotal in proving its case against the Korean government in its $770 million ISD suit over Samsung’s merger that it claimed to have caused massive losses for shareholders.

The U.S. hedge fund believes that they are evidences that can monetize losses in the process of merger between Samsung C&T and Cheil Industries as they are grounds of stock manipulation.

Korean prosecutors suspect that Samsung Group carried out a merger between Samsung C&T and Cheil Industries after deliberately depreciating the value of Samsung C&T and appreciating that of Cheil Industries in 2015 for the benefit of the younger Lee taking in charge of the group on behalf of his bedridden father. In 2018, Elliott filed an ISD lawsuit against the Korean government, stating that it unfairly interfered with the merger as the Korean government pressured National Pension Service. The hedge fund said it suffered losses as it owned Samsung C&T shares.

During deliberation commission on Lee on June 26, Lee’s attorney noted that what’s being stated by prosecutors is similar to what is being raised by Elliott.

On June 24, however, ISD tribunal has rejected Elliott’s request. It found the justice ministry’s submission of the files could go against the act banning publications of suspected offenders whose judicial process are under progress.

If Lee is indicted on the ongoing case on the controversial merger, Ellliott could go after the files again.

An internal review team of the prosecution has advised the state prosecutors to drop the case on Lee. The prosecution will announce whether it will take up the recommendation during this week at the earliest.

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