On a Thursday afternoon in June 2020, two executives from the LG finance department arrived at the hilltop home of Kim Young-shik, the widow of the company’s previous chairman, for what was supposed to be a routine review of her family’s finances.
They sat at a long wooden table near the entryway, looking out at sweeping views of Seoul and a Japanese garden tended by the former chairman, who had died two years earlier. He had built LG into one of South Korea’s most powerful chaebols, the family-run conglomerates that have dominated the country’s economy for decades.
Ms. Kim and her elder daughter spent part of the meeting discussing their monthly electricity bill and whether to buy or lease a new Chevrolet van. Then the women turned to what they really wanted to talk about. They wanted an explanation of a secret formula governing how the family’s shares in LG were divided after the death of their husband and father, Koo Bon-moo.
A top company official said the family’s assets, including its 38 percent stake in LG, were pooled and effectively controlled by a small circle of family members known as the “shareholder group.”
They said Koo Kwang-mo, LG’s chairman and Ms. Kim’s adopted son, controlled about two-thirds of the family’s stake — around 26 percent of LG shares. That’s significantly higher than the 16 percent disclosed in regulatory filings, a gap worth about $1.6 billion, suggesting that some of his shares were held in the names of other family members.
At one point in the meeting, the top official, Ha Beom-jong, now LG’s president, said Ms. Kim could start using some of her late husband’s money that was held in other relatives’ names. Because the names were “dispersed,” he said, the South Korean authorities would not find a paper trail to tax her.
What the officials did not know was that Ms. Kim was secretly recording the meeting, a recording that has become central to an effort by the widow and her daughter to expose what they see as potentially criminal behavior at the company.
For decades, Ms. Kim’s life revolved around the company and the family, their interests so intertwined that it was difficult to distinguish where one began and the other ended, with her husband at the helm of both. Even their adoption of Koo Kwang-mo was intended to protect the company, a conglomerate with an array of global businesses, including LG Electronics.
After their teenage son tragically died in 1994, she and her husband tried to have another child, hoping for a boy to carry on the company’s tradition of male primogeniture. When they had another daughter, they adopted Kwang-mo, her husband’s nephew, positioning him as heir.
But Ms. Kim’s relationship with the company — and, ultimately, with her family — started to fracture as she grew suspicious of what LG officials and Koo Kwang-mo were saying about what she and her two daughters would inherit.
“I was anxious and afraid that if I were to die, everything would again be given to Kwang-mo, leaving my daughters with nothing,” Ms. Kim said in a written response to questions from The New York Times.
Her recordings, along with transcripts of other conversations her daughters had with LG officials, were among hundreds of pages of documents and court records filed in a 2023 lawsuit brought by Ms. Kim and her daughters. The women said they had been misled into accepting an unfair inheritance agreement that left Koo Kwang-mo with an outsize portion of the former chairman’s estate, valued at nearly $2 billion.
Lost in the drama of the lawsuit is the women’s claim that they were kept in the dark about an illegal ownership structure in which they were unwitting participants, and that the late chairman’s wealth was far greater than publicly disclosed.
In February, a South Korean court dismissed the inheritance lawsuit, saying that the women’s claims lacked merit and that there was no evidence that the shares were held in other people’s names. The women said they planned to appeal.
The ruling was a victory for LG’s corporate leadership. But it may not end the fight: In a previously unreported development, Ms. Kim and her elder daughter filed a criminal complaint with the Seoul Central District Prosecutors’ Office in November 2024 against Koo Kwang-mo and his biological father. Mr. Ha and another senior LG official were named in the complaint.
The women’s legal fight is centered on the unusual governance practices of South Korea’s chaebols — an unconventional mix of corporate giants and family-controlled businesses. At the heart of the criminal claim is a practice known as a borrowed-name, or nominee, arrangement, in which one person holds shares on behalf of another.
In 1993, South Korea passed a law requiring real names for financial transactions to prevent the hiding of assets, although it did not explicitly state that shares under borrowed names were illegal. However, the practice is often used to facilitate crimes such as tax evasion or to skirt financial regulations, said Bahng Minju, a partner at the Weon Law Firm in Seoul. The arrangements are difficult to prove, he added, because they typically involve family members, leave little documentation and rely on tacit agreements.
Woochan Kim, a finance professor at Korea University Business School, said that nominee shares were more common in the past, but that the incentive persisted for some chaebol families trying to avoid South Korea’s inheritance tax, among the world’s highest at up to 50 percent.
The women say such practices were used in their family. In their criminal complaint, they said nominee shares had been used to commit tax evasion, embezzlement and violations of capital markets laws, and asked prosecutors to open a full investigation.
In South Korea, anyone who believes that he or she is the victim of a crime can file a criminal complaint, leaving prosecutors to decide whether to investigate or pursue charges. A spokesperson at the prosecutors’ office declined to comment on the complaint, citing rules against discussing individual cases.
Koo Yeon-kyung, the former chairman’s elder daughter, said in a statement to The Times that she, her sister and their mother wanted to dismantle the nominee ownership structure. It allows certain individuals to “consolidate enormous power and wealth” while leaving others, especially the women, “isolated, misled and deprived of their rightful inheritance,” she said.
In a separate written interview, Ms. Koo said many relatives had been unaware of the nominee shares and simply followed instructions from family elders and the financial management team.
Yulchon, a South Korean law firm that has represented LG’s chairman in the inheritance lawsuit, did not answer direct questions about the recordings, but said they reflected only “excerpts or isolated words” selected by the women. The firm also said the dispute was in “no way related to gender” and centered on agreements of free will and compliance with the law. (The firm said it was responding to a request for comment that The Times had sent to Koo Kwang-mo, Mr. Ha and Kang Yoo-shik, a former vice chairman of LG and a longtime aide to the former chairman.)
Yulchon said in a statement that the women’s claims repeated arguments that they “unilaterally asserted without objective evidence” or “presented in a distorted manner” in the earlier civil case, noting that the South Korean court did not accept those claims.
Beyond the legal risks, the allegations from Ms. Kim and her two daughters, who together hold about $1.1 billion worth of LG shares, could revive long-running criticism that chaebol families favor their own interests over those of other investors. Over the past year, LG’s share price has risen about 49 percent, but it has lagged South Korea’s benchmark KOSPI Index, which has more than doubled.
LG’s founding family has faced past tax investigations. In 2018, prosecutors raided the company’s Seoul headquarters and indicted 14 Koo family members and the finance team on charges of evading billions of won in capital gains taxes, including Koo Kwang-mo’s biological father, Ms. Kim and her elder daughter. A Seoul court declared all parties not guilty in 2019.
The episode drew attention to the family’s finances, but not their management. The women said LG’s nominee-share system is run by a financial management team that controls the assets, bank books and personal seals of dozens of family members, enabling it to open accounts, take out loans and conduct transactions without their knowledge or consent.
Koo Yeon-kyung, the elder daughter, said in the written interview that she discovered in 2022 that 21 bank accounts had been opened in her name without her approval.
At a meeting in May 2022, when the women were considering filing their lawsuit to nullify the inheritance agreement, Koo Kwang-mo, who had become the company’s chairman, told them that doing so might shed light on this longstanding family practice and that, as the corporate leader, he would be criminally liable.
“Because the names don’t match from the top, there is a risk,” he said in a recording made by Ms. Kim and reviewed by The Times.
“If employees become whistle-blowers, I could get 30 years in prison,” he said. “That’s why only a small number of people talk about this.”
Koo Kwang-mo did not respond to questions about this comment. Yulchon said its statement stood in lieu of his response.
At a separate meeting with Ms. Kim a few months later, Mr. Kang, the former LG vice chairman, said he was there to offer more details about how the so-called shareholder group operated and how it dated back generations to a structure established by the company’s patriarchs.
“The name doesn’t matter,” Mr. Kang said in the recording. “Ultimately, this was about adjusting the shareholders’ assets to maintain these proportions.” He, too, did not respond to a request for comment. Yulchon, the law firm, said its statement stood in lieu of a separate response from Mr. Kang.
When Mr. Kang testified as a witness in the lawsuit in January, he said he did not know if Koo Kwang-mo controlled more shares than the chairman had publicly disclosed, but denied the existence of borrowed-name shares. During questioning, Mr. Kang said his conversation with the widow had been about not something already done but rather an aspirational “moving target” for the family to strive toward.
On the witness stand, Mr. Kang said he had gone to speak with Ms. Kim to clear up any confusion and put to ease any grievances she might have felt. But the conversation, according to the recording, also included a warning that moving forward with the lawsuit could jeopardize LG’s reputation as a harmonious company.
“Please resolve this within the family,” Mr. Kang said. “If this gets out, the company’s reputation will be ruined.”
