When Koo Bon-moo, chairman of South Korean conglomerate LG, died in 2018, there wasn’t much question, at least publicly, of who would next preside over the company.
LG, a $10 billion corporate empire, is governed by the principle of male primogeniture. Succession was effectively settled 14 years earlier when Mr. Koo and his wife adopted their eldest nephew, Koo Kwang-mo. The adoption was necessitated by tragedy and tradition after the couple’s teenage son died in 1994, and their efforts for another male heir resulted in a second daughter.
The Koo family has controlled LG since it was founded in 1947, and the transition that elevated Kwang-mo to the helm seemed seamless, burnishing the family’s reputation for harmony.
The former chairman died, at age 73, without a will. What followed was a power struggle within the Koo family and LG over the inheritance of his estimated $1.5 billion fortune — including his 11 percent stake in the company. Now, five years later, the former chairman’s widow and two daughters are suing Koo Kwang-mo, accusing him and other LG executives of deception to steal their rightful inheritance to bolster his claim to the company.
The women said they want their full inheritance, but they are not seeking control of LG.
The lawsuit not only pits the matriarch of one of South Korea’s wealthiest families and her daughters against the adopted male heir, who is now one of the country’s most influential business figures. It also challenges LG’s patriarchal tradition that allows the oldest male successor to seize power and wealth, leaving female family members as afterthoughts in the company.
The LG chairman, Koo Kwang-mo, left, with the chairman of Lotte, a South Korean multinational, at a dinner in London last month for a state visit to Britain by South Korea’s president.Credit…Yonhap/EPA, via Shutterstock
Omnipresent in South Korea, LG is a holding company comprising 11 publicly traded businesses, including LG Chem, the country’s largest materials and chemicals firm, and LG Electronics, whose televisions, dishwashers and other home appliances are popular worldwide.
The Koo family is one of a few wealthy clans — along with the Lee family at Samsung, Hyundai’s Chung family and SK’s Chey family — who run the conglomerates known as chaebols that have dominated South Korea’s economy for decades.
In a legal filing that reads like a Korean drama script involving one of the country’s biggest corporate employers, the former chairman’s widow, Kim Young-shik, and her daughters, Koo Yeon-kyung and Koo Yeon-sue, accused LG executives of colluding with Koo Kwang-mo and his biological father to swindle them.
In transcripts of secretly recorded conversations filed in the legal documents, Koo Kwang-mo pleads with his adopted mother not to challenge the inheritance because it will hurt LG’s image and his leadership of the company, potentially tarnishing his reputation among the Korean public.
“The scariest thing is the public opinion,” he said, according to the transcript. “How are they going to look at this situation? ‘Someone got greedy,’ or that I didn’t come visit and do a good job of caring for my mother.”
In addition, the women accused Ha Beom-jong, the former chairman’s aide and now LG’s president, of misleading them to believe that there was a will that left everything to Koo Kwang-mo. Without a will, South Korean law states, the widow would be entitled to inherit one-third of the estate with the remainder divided equally between the two daughters and Kwang-mo.
Instead, the women said they were duped into an agreement in which roughly 75 percent of the estate went to Kwang-mo. The lawsuit, filed in Seoul Western District Court, seeks to redistribute the estate according to the legal standard.
“We cannot stand having our rights, protected under the constitution and the law, be disregarded just because we are women,” the women said in a notice filed with the lawsuit.
Yulchon LLC, a law firm representing Kwang-mo, said in a statement that the inheritance is “a legally settled matter” that was resolved four years ago after extensive negotiations, and that there have been about 10 rounds of consultations and several revisions since the chairman’s death. It also noted Ms. Kim had signed a document agreeing that Kwang-mo should receive the LG shares and assets related to controlling the company.
While LG is not a party to the lawsuit, it has also staged a vigorous defense of Kwang-mo in public statements. LG also suggested that the women were trying to challenge Koo Kwang-mo for company control, something that they deny.
“Any attempt to shake LG’s tradition and management rights cannot be tolerated,” the company said in a statement earlier this year.
LG’s Deep Roots
The Koo lawsuit is one of several recent legal proceedings involving chaebols that highlight the challenges of family succession and control.
Lee Jae-yong, Samsung’s executive chairman, is entangled in a criminal case accusing him of breaking the law to clear the way for the merger of two group affiliates that helped strengthen his control of the company. Mr. Lee has denied any wrongdoing.
Chey Tae-won, chairman of SK, the conglomerate behind the country’s biggest mobile carrier, is embroiled in a divorce after 34 years of marriage. Last year, a Seoul court awarded his former wife about $50 million — roughly 1 percent of his net worth — but not any of his 17.5 percent stake in the company. She is appealing the ruling.
Woochan Kim, a finance professor at Korea University Business School, said these legal disputes will make it harder for the conglomerates to maintain control within the family.
“Family succession will cease to exist for very large Korean chaebols,” Dr. Kim said.
LG was founded by Koo In-hwoi, Kwang-mo’s great-grandfather, when the country was still emerging from Japanese colonial rule, and rival governments were being formed in the north and south, setting the stage for the Korean War. Originally called Lak Hui (pronounced “lucky”) Chemical, the company’s breakthrough product was a cosmetics cream. After changing its name to Lucky Goldstar, it produced goods for a modernizing Korea, including the country’s first toothpaste, radio and washing machine.
By the time Koo Bon-moo, the founder’s grandson and the oldest son of six siblings, took over in 1995, the company, now called LG, was deeply embedded in Korean life. LG built apartments, established an economic research institute and started a baseball team.
A year before Mr. Koo became chairman, his 19-year-old son died of a heart attack a few days after his high school graduation, leaving the family with one daughter but no male heir. Ms. Kim, the chairman’s widow, said they tried for another son. Two years later, in her mid-40s, she gave birth to a daughter, Yeon-sue.
In a statement, Yeon-sue, now a 27-year-old musician, said that for her parents, the pain of losing a son was compounded by the succession issue.
“That’s the way it is in my family,” she wrote. “I used to feel guilty about the fact that I wasn’t born a son.”
Without a male heir, Ms. Kim said her father-in-law pressured them to adopt Kwang-mo — then 26. He was the oldest son of Bon-moo’s eldest brother, Koo Bon-neung. A decade after her son’s death, Ms. Kim said she and her husband relented.
“For my father-in-law, that was really important,” she said.
In 2017, Bon-moo was 72 and still seemed healthy, planning for the company’s future and hiking on the weekends. He went to the doctor because his face appeared slightly lopsided, and he was diagnosed with glioblastoma, an aggressive form of brain cancer.
Bon-moo’s brain surgery in April 2017 went smoothly but after a second operation in December, he suffered a seizure that left him unable to speak, sending his health into a downward spiral. He died in May 2018.
His death raised a possible succession battle. During his illness, the company was being run by one of his other brothers, Koo Bon-joon, who had led one of LG’s most high-profile businesses. Koo Kwang-mo, who was 40 at the time, had been an LG executive for a decade but had accrued little management experience.
Bon-moo’s ashes were scattered among trees, as was his wish. In the blur of the funeral proceedings, his wife and daughters claim, Kwang-mo’s biological father and LG officials started angling for control.
Without notifying them, the women say, Kwang-mo’s biological father and LG officials enlisted a locksmith to help them pry open the former chairman’s safes at the company office and a vacation home.
Then Mr. Ha, who had been Bon-moo’s aide, and another employee came to the family’s stately home in Seoul and told them that the senior Koo had left a will, according to the women in interviews with The Times. His wishes, they recalled the employees telling them, were that all his shares and the chairmanship go to his adopted son, in keeping with family custom since LG’s founding. Mr. Ha has denied in court testimony that he ever told the family there was a will.
“The person my father trusted the most and supposedly knew everything came to us and said there was a will, and based on that, it all goes to Kwang-mo,” Koo Yeon-kyung, the eldest daughter, 45, said in an interview.
While LG is a publicly traded company with 220,000 employees, its finance department does more than handle the company’s books. It also manages the personal assets and bank accounts of family members. Employees kept the personal seals for family members and routinely inked documents on their behalf.
In court testimony, Mr. Ha said that there wasn’t a will but a memo with Bon-moo’s wishes signed a few days before his first surgery. It was later shredded in the routine destruction of documents, he said, adding that he showed it to the women and Kwang-mo shortly after the former chairman’s death. The women say they never saw it.
Ms. Kim, 71, said she was told she needed to forgo inheriting any of her husband’s shares to ensure Kwang-mo’s succession and prevent any challenge from her late husband’s brother, Bon-joon. She said she went along with it, but she questioned Mr. Ha about whether Bon-moo truly wanted his daughters to receive no shares. She said Kwang-mo eventually agreed to give roughly a fifth of Bon-moo’s shares, worth about $270 million by current share prices, to his two sisters.
They said while the older Koo was alive, they never questioned the family’s patriarchal ways. Their expectation, they said, was that Kwang-mo, as his adoptive father and grandfather had before him, would make sure everyone in their extended family was financially taken care of and would carry out ancestral rites that are Korean tradition.
Yeon-kyung, the eldest daughter, said she was told that the terms of the inheritance should be guarded with utmost secrecy, so much so that she didn’t talk to her husband or consult an attorney. The agreement was read out to her and her mother once, and they were never given a copy, she said.
The women said that they were told that they would receive the former chairman’s cash, other investments and the family’s home in Seoul, and that Kwang-mo would pay hundreds of millions of dollars in inheritance tax. South Korea levies a tax of at least 50 percent on inherited assets over $2.3 million.
Through the agreement, Kwang-mo strengthened his claim to be chairman. Before the former chairman’s death, Kwang-mo owned 6.1 percent of LG shares. Koo Bon-joon, the brother who was running the company, held 7.6 percent. By inheriting most of the former chairman’s stock, Kwang-mo’s stake grew to about 15 percent.
He became the chairman of LG in June 2018. Bon-joon agreed to leave the company, but he wouldn’t go away empty-handed.
LG announced in November 2020 that it was going to spin off five affiliate businesses into a new holding company with Bon-joon as the chairman.
The U.S. hedge fund Whitebox Advisors protested the move, calling it a “solution to a succession problem” that gave priority to family needs but went against the interests of outside investors in the company.
In response, Mr. Ha, the former aide who was now promoted to LG’s chief financial officer, told investors the plan “will diversify investment risk and provide an opportunity” for LG and the new company.
Shareholders approved the spinoff. Shares of the new company, LX Holdings, started to trade publicly in May 2021. Bon-joon sold most of his LG shares later that year and used the proceeds to buy shares in his new company.
“Running a public company as a private fiefdom for the benefit of a controlling shareholder adversely affects minority investors and is a disincentive for outside investment,” Simon Waxley, head of equity arbitrage at Whitebox, said in a statement to The New York Times.
The women said they continued living their lives normally. Yeon-kyung, who studied social work, said she remembered her father’s wishes that she get involved in running LG’s charitable foundations, and started working at one of them as an adviser in 2021.
Around that time, Yeon-kyung said, she felt something was amiss when she applied for a store credit card to get a discount on a gift for a friend, but was rejected because she had too many loans. She said that came as a surprise to her.
Realizing how little she, her sister and her mother knew about their own finances, she started going from bank to bank to pull years’ worth of statements. There were large inheritance tax payments and loans against their LG shares that didn’t comport with their understanding that Kwang-mo alone would shoulder the tax. When they started asking questions to LG’s finance team, they felt they were getting partial or evasive answers, Yeon-kyung said.
They were told a copy of the inheritance agreement was kept in storage away from Seoul and would take weeks to retrieve.
As the women pieced together the state of their finances, they said, they realized that Kwang-mo had also received more cash and investment assets than they thought they had agreed to.
“Isn’t that strange, it was our money but we didn’t know how much we had,” Yeon-kyung said. “It started to seem odd.”
Growing mistrustful, Yeon-kyung said she and her mother began secretly recording conversations with Kwang-mo and Mr. Ha in 2022. Throughout the year, the exchanges grew tense, and at times, emotional, according to excerpts from transcripts, which the plaintiffs have cited as evidence that they were misled by the men now running LG.
In one recording from November 2022, Ms. Kim complained to Kwang-mo that they were treated by the finance staff as if they could be ignored because they were women.
“All this time has passed, and now that we look into it, so much was done without our knowledge,” she said, according to a transcript.
“The ‘our’ you mention doesn’t include me, right?” Kwang-mo asked in return.
Kwang-mo sent his mother a letter in January clarifying the unexplained withdrawals from her accounts. He said that, unbeknown to him, “the employees” were short on funds to pay the inheritance tax under his name, so they paid it under her name using her assets, but that they had planned to pay her back. Still, he asked her not to assert her inheritance rights.
“If the elders each asserted their rights under the inheritance law, LG’s management control would not have been passed down to the 4th generation as it is now,” he wrote in the letter.
A month later, the women filed suit.
In September, Kwang-mo came to the family home for Chuseok, a major Korean mid-autumn holiday, when more than 100 extended family members got together for the customary ancestral rites.
The family carried out the elaborate ceremony, paying their respects to deceased family members as they always had, but an awkwardness hung between Kwang-mo and his adoptive mother and sisters. He seemed to avoid them, ducking into different rooms in the cavernous home, the women said.
“He didn’t make eye contact, or talk,” Ms. Kim said. “He just hurriedly left.”