April 29, 2024

South Korean Executive’s Arrest Seen as Move to Tame Conglomerates

SEOUL — The head of CJ Group, a major conglomerate in South Korea, was arrested on charges of embezzlement and tax evasion as the country’s parliament enacted a series of laws on Tuesday that were aimed at protecting smaller businesses from large corporations like his, which have dominated the economy for decades.

Lee Jay-hyun, the CJ Group chairman, who was locked up shortly before midnight Monday, was accused of stashing hundreds of millions of dollars under others’ names, dodging 70 billion won, or $61 million, in taxes and misappropriating 100 billion won in company money.

Mr. Lee, 53, a grandson of Lee Byung-chull, the founder of the Samsung empire, was the first tycoon to be arrested on corruption charges since President Park Geun-hye took office in February amid mounting public calls for “economic democratization.” In her inaugural speech, Ms. Park took note of public sentiment, vowing to deal sternly with tycoons involved in white-collar crimes and the conglomerates’ expansion at the cost of smaller businesses.

Although all the rival parties agreed during the presidential campaign last December to enact several bills that would act as checks on the conglomerates’ power, the writing of the legislation has proven contentious.

South Korea’s economic growth has depended heavily on exports and expansion led by a small group of family-owned conglomerates like CJ, Hyundai and Samsung. The conglomerates, known as chaebol, have vigorously lobbied the National Assembly in recent months, insisting that overly strict restrictions would hurt their competitiveness and profitability and damage the South Korean economy in general, an argument supported by many lawmakers affiliated with Ms. Park’s conservative governing party.

Ms. Park recently said any overhaul bills should not hurt the chaebols’ potential for leading economic growth as the economy slowed, and the political opposition accused her of retreating from her campaign promises.

After months of bickering, the competing parties agreed on several pieces of legislation Tuesday.

Under one new law, subsidiaries of a chaebol partly owned by its chairman’s family would have a harder time monopolizing supply orders from the rest of the business empire. Amid widespread discontent over the widening gap between rich and poor, South Koreans have fumed at the way the tycoons helped their children inherit easy fortunes: Companies sold shares to the chairmen’s children at unrealistically low prices or showered lucrative business orders on affiliates owned by the chairmen or their families without conducting competitive bidding.

But even before that bill was put to a vote, critics said political bargaining had turned it into a “paper tiger” with too many loopholes and exceptions.

“This is cheating the people in the name of economic democratization,” Solidarity for Economic Reform, a civic watchdog on chaebol, said in a news release.

Another law passed Tuesday protects the rights of small-business owners who operate convenience stores under a franchise agreement with chaebols. A third reduced the maximum percentage of a bank a chaebol is allowed to own to 4 percent, from 9 percent .

By trying to curb the power of chaebols, Ms. Park is struggling with her father’s legacy.

Her father, the longtime strongman Park Chung-hee, who ruled South Korea from 1961 to 1979, nurtured a handful of family-controlled businesses with easy credit, subsidies, tax benefits and protection from foreign competitors. Those companies, including Samsung and Hyundai, have grown into globally recognized conglomerates that have been widely credited with leading South Korea’s economic growth, exporting goods as diverse as computer chips, cellphones, cars and ships.

But at home, the sprawling corporate empires are also seen as predators, as their dominance in increasingly diverse swaths of the economy has come at the expense of smaller businesses. For example, they run rapidly expanding nationwide chains of hypermarkets, supermarkets and 24-hour convenience stores that have squeezed out traditional markets and mom-and-pop stores.

Article source: http://www.nytimes.com/2013/07/03/business/global/south-korean-executives-arrest-seen-as-move-to-tame-conglomerates.html?partner=rss&emc=rss

DealBook: Thai Magnate’s $11.2 Billion Bid Poised to Win Fraser & Neave

HONG KONG – After four months of fierce bidding between two Asian tycoons, a multibillion-dollar battle for control of Fraser Neave appears to have reached its denouement.

A bidding deadline on Monday evening set by Singapore’s takeover regulator came and went, meaning the victor will probably be TCC Assets, controlled by Charoen Sirivadhanabhakdi of Thailand. It raised its offer on Friday to 9.55 Singapore dollars a share, valuing Fraser Neave at 13.76 billion dollars ($11.19 billion).

That was apparently enough to chase away a counteroffer by Overseas Union Enterprise, which is part of the Indonesian billionaire Mochtar Riady’s Lippo Group and is led by Mr. Riady’s son Stephen.

Overseas Union had entered the contest for Fraser Neave in November, when it bid 9.08 dollars a share.

Under the terms of the auction process — mandated last week by the takeover regulator, Securities Industry Council, and intended to remove uncertainty for shareholders — Overseas Union had until 6 p.m. on Monday in Singapore to submit an increased offer.

Had it done so, TCC Assets would have had 24 hours to counter, and the auction process would have continued in this manner until one of the parties failed to submit a counteroffer.

In a statement after the deadline passed, Overseas Union confirmed it had not made a new bid, saying that in order to succeed it “would need to significantly increase the offer price to a level which is no longer as attractive to Overseas Union, in particular, given the potential impact of the recent measures taken by the Singapore government in relation to the property market.”

Fraser Neave, established in 1883 to sell carbonated drinks in Southeast Asia, owns businesses that include beverages, shopping centers and full-service apartments. In September, the company agreed to sell its controlling stake in Asia Pacific Breweries, the maker of Tiger Beer, to Heineken in a deal worth $4.6 billion.

TCC Assets already owned a 30 percent stake in Fraser Neave, and in September made an initial takeover bid for the company at 8.88 dollars a share. Since then, TCC Assets has increased its stake to 40 percent. The Thai company’s revised bid on Friday represented a 5.2 percent premium to the offer submitted by Overseas Union in November.

The passing of Monday’s deadline without a new bid from Overseas Union means shareholders are likely to favor the higher offer from TCC Assets when they eventually vote on the deal. A vote has yet to be scheduled.

Investors in Fraser Neave have been bullish about a bidding war for the last few months. On Monday, an hour before the bidding deadline, the stock closed at a record high of 9.74 dollars. That was up 1.7 percent from the closing price on Friday and above any of the takeover bids that had been announced up to the end of the trading day.

Overseas Union is being advised by Credit Suisse, Bank of America Merrill Lynch and C.I.M.B. of Malaysia. TCC Asset’s advisers are the United Overseas Bank, DBS of Singapore and Morgan Stanley.

Article source: http://dealbook.nytimes.com/2013/01/21/11-2-billion-thai-bid-poised-to-win-singapore-conglomerate/?partner=rss&emc=rss

G.O.P. Bill Would Block Food Stamps and Jobless Pay for Millionaires

Under the Republican bill to extend a payroll tax holiday scheduled to be voted on in the House as early as Tuesday, those Americans with gross adjusted income over $1 million would no longer be eligible for food stamps or jobless pay, producing $20 million in savings to help pay for the tax cut for American workers. The idea is also embraced by many Democrats, who had a similar version of the savings in a Senate bill to extend the payroll tax cut, as did a failed Republican Senate bill.

Yet as it turns out, millionaires on food stamps are about as rare as petunias in January, even if you count a lottery winner in Michigan who managed to collect the benefit until chagrined officials in the state put an end to it.

But the idea of ending unemployment insurance for very high earners — which would be achieved essentially through taxing benefits up to 100 percent with a phase-in beginning for those with gross adjusted income over $750,000 — demonstrates an increasing desire among members of Congress to find some way to make sure that the wealthiest Americans contribute more to reducing the deficit and paying for middle-class tax relief.

Democrats have sought a surtax on income over $1 million to pay for an extension of a tax break for the middle class, a surtax that Republicans have rejected. Employees’ share of the payroll tax, now 4.2 percent of wages, is scheduled to rise to 6.2 percent in January unless Congress takes action. The Senate is expected to come back this week with another version of its bill to extend the tax holiday. On Monday night, the majority leader, Senator Harry Reid, Democrat of Nevada, served notice to Congressional Republicans that he would prevent final votes on a must-pass bill to finance government operations until the Democrats get what they want on the payroll tax.

While tycoons on food stamps might be hard to find, some millionaires do indeed pursue unemployment pay when they find themselves out of job.

From 2005 to 2009, millionaires collected over $74 million in unemployment benefits, according to an estimate by Senator Tom Coburn, Republican of Oklahoma, who has paired with Senator Mark Udall, Democrat of Colorado, to push to end the practice.

According to Mr. Coburn’s office, the Internal Revenue Service reported that 2,362 millionaires collected a total of $20,799,000 in unemployment benefits in 2009; 18 people with an adjusted gross income of $10,000,000 or more received an average of $12,333 in jobless benefits for a total of $222,000.

“Making Coloradans pay for unemployment insurance for millionaires is frankly irresponsible, especially at a time when money is tight and our debt is out of control,” Mr. Udall said in an e-mail.

Unemployment benefits are essentially an insurance program financed through the state and federal governments. States charge employers taxes dedicated to cover the first 26 weeks of unemployment benefits paid to those Americans who lose their jobs, with the federal government paying for extensions.

Currently, unemployment benefits have stretched out to 99 weeks, through a series of nine extensions that began in 2008, reflecting the high levels of extended unemployment that have dogged the country, at a cost of roughly $180 billion to the federal government. (While there are also federal taxes charged to employers, those monies tend to be used for administrative costs and not benefits.) Roughly 3.5 million people are now receiving extended benefits. Some states have already begun to reduce the number of extended weeks unemployment offered.

The Republican legislation seeks to shorten the number of weeks that will be extended to the jobless, and offer states more flexibility with how they use their own unemployment taxes, including starting programs that train people for work while they accept benefits.

“It’s a water drop in a hurricane,” said Wayne Vroman, an economist at the Urban Institute. “I can see the PR appeal, but unemployment insurance collected by millionaires is not one of the major problems with the program. This is a way of trying to put an income test on the unemployment system that has never existed in the past.”

Food stamps are another matter, as recipients must demonstrate low income levels to receive them. Household income must not exceed 130 percent of poverty; for a family of three that would be a gross monthly income of $2,008.

However, of the 53 states and territories, 40 have no asset tests, which means that in some situations it would be possible for someone with, for instance, a large house or a luxury car — or in the case of Michigan, current lottery winnings not yet delivered in full — to receive food stamps.

Department of Agriculture officials dismissed the notion of millionaire food stamp recipients. “Federal law is clear,” said Aaron Lavallee, a spokesman for the department. “The program is intended for households with income not exceeding 130 percent of poverty.”

Among the 46 million Americans who receive the assistance — roughly one in seven Americans — few seem to be millionaires. As such, the $200 million in savings from this cut would be largely achieved through the cuts to the unemployment insurance for high earners.

Jackie Calmes contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=058807efb2d6d46fa44484a5d068ff22