November 22, 2024

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SK Group Chairman Chey Tae-won takes a question from a reporter at a press briefing at the group's Seoul headquarters on Monday. (Yonhap)

SK Group Chairman Chey Tae-won’s high-profile divorce from his estranged wife Roh Soh-young has entered a new phase as the Seoul high court made a rare rectification of a mistake in its ruling that ordered the chaebol chief to pay $1 billion in property division to the wife.

On Monday, the appellate court corrected numerical errors in its written judgment for the divorce settlement of Chey and Roh but upheld its original ruling involving the record-high divorce settlement.

Earlier in the day, Chey’s attorney argued that the court made a mistake in evaluating the value of the SK stocks Chey owns. This led to the court's miscalculation of the stock's growth level since Chey's ownership, and the chairman's level of contributions to the company, according to Lee Dong-keun, Chey's attorney from the Yoon & Yang law firm.

The court initially calculated the value of one Daehan Telecom share at 8 won in November 1994 when Chey purchased the stocks with the money he received from his father Chey Jong-hyun. Daehan Telecom, renamed SK C&C in 1998, is the origin of SK Inc., the group’s holding unit.

The court made a mistake by valuing the company stock at 100 won per share, when it should have been 1,000 won, in May 1998 -- when the former chairman passed away. From then to November 2009 when SK C&C went public, the court valued the company at 35,650 won per share.

So the court initially concluded that Chey Tae-won's contribution led the company to grow 335 times bigger, while his late father contributed to the company's growth by 12.5 times. But the actual figures should be 125 times for the father’s contributions and 35.5 times for the son’s contributions.

Based on the correct calculations, Chey’s legal team argues that the court should revisit the logic flow in designating what should be seen as joint property of Chey and Roh, hinting at an appeal to the Supreme Court.

(Graphics by The Korea Herald)

Views are mixed among legal experts.

“It is quite rare that the court makes such a mistake and corrects the error,” said Lee Hyung-gon, a judge-turned-lawyer. However, Lee remained cautious about whether the correction would affect the ruling.

“It remains to be seen whether the Supreme Court finds the numerical mistake as critical or not.”

He added that the more critical part could be Roh’s claim of her father giving slush funds to Chey, which the SK chief flatly denies.

In 2022, the rate of the top court's dismissal of appeal was 93.6 percent.

Industry watchers predict that the direction of the case will likely be decided in four months after the appeal is filed, the period during which the top court has to decide whether to dismiss or hear the case.

‘Fat finger’ failures

Industry officials view the mistake could be interpreted as a “fat-finger” error, which refers to errors in financial markets caused by inputting wrong data, which sometimes snowballs into financial losses or triggers significant market impact.

For instance, a trading mistake at Citigroup’s subsidiary Citigroup Global Markets Limited in 2022 which processed a $444 billion order meant to amount to just $58 million prompted a $48 million loss for the company. The blunder further led the US banking giant to face a $78.5 million fine from UK regulators for lacking control over its trading operations.

Sometimes, numerical blunders escalate into the collapse of a securities firm.

Korean brokerage house HanMag Securities declared bankruptcy in 2013 following an ordering mistake on index options transactions, suffering an unexpected loss of 46 billion won.

In 2005, Japan's Mizuho Securities mistakenly offered to sell 610,000 shares of telecom outsourcing firm J-Com for 1 yen each, instead of one share for 610,000 yen, which cost the firm losses of 40 billion yen ($253 million). The blunder led to a massive fluctuation in J-Com’s stock value. Investors ditched securities equities, which later evolved into a broader market sell-off, bringing down the overall stock market prices.

The court's flip-flop over the SK stock price has brought attention to late Samsung Chairman Lee Kun-hee being accused of breach of trust for issuing bonds with a warrant for Samsung SDS at a lower value than their market price.

In 2008, Lee was acquitted of the charges in the first verdict trial with an appellate court. The Supreme Court overturned the verdict and returned it to the appellate court for a retrial, stating the lower court used the "wrong method" in calculating the market prices of the bonds. The following year, the court sentenced him to a three-year prison term, five-year probation and a 110 billion won fine.

By Jo He-rim (herim@heraldcorp.com), Im Eun-byel (silverstar@heraldcorp.com)