Starting on October 4, 2021, KCIJ-Newstapa reports the findings of the project “The Pandora Papers: Koreans who Fled to Tax Havens 2021.” It is a collaborative project led by the International Consortium of Investigative Journalists(ICIJ) which was joined by more than 600 journalists from all over the world. This global team of journalists has been investigating over 11.9 million documents leaked from 14 offshore service providers, including Trident Trust, Alcogal and IL SHIN CPA and IL SHIN Corporate Consulting.

– Editor’s Note -

A cross-border investigation by the Korea Center for Investigative Journalism(KCIJ)-Newstapa and International Consortium of Investigative Journalists(ICIJ) has confirmed for the first time that Lee Jae-yong, vice chairman of Samsung Electronics, set up an offshore company in the British Virgin Islands. The offshore shell company was found to be incorporated between March and May 2008. It overlaps the period when the allegation of Samsung’s slush funds, which had been exposed by the conglomerate's former chief lawyer Kim Yong-chul, triggered a full-scale investigation by special prosecutors in South Korea.  

Over the years, the Samsung group has been repeatedly alleged of creating and hiding slush funds overseas. But this is the first time that its head has been confirmed to have set up a shell company in a tax haven. 

An offshore shell company held by Samsung Group’s de facto chief Lee Jae-yong was identified from the Pandora Papers documents. Documents about Lee’s offshore company came from the leaked files from Trident Trust, one of the world’s largest offshore service providers. 

In the database of Pandora Papers project, more than 200 files come out when searching with the keyword ‘Lee Jae Yong.’

After reviewing every single file that included the keyword ‘Lee Jae Yong,’ Newstapa found an individual named Lee Jae-yong who was born in 1968 and resides in Hannam 2-dong, Yongsan District, Seoul. His information matched with that of the Vice Chairman of Samsung Electronics.

Newstapa also identified a passport copy, which was attached to one of the incorporation documents. It was a black-and-white and blurry copy sent through fax, but it was certainly the Samsung chief with the same date of birth and autograph ‘Jay Y. Lee.’ 

According to documents related to Lee, he was found to have owned a British Virgin Island(BVI)-based company Bachury Finance Corp. since 2008. This company was a shelf company incorporated on March 7, 2008.

Bachury Finance Corp. had three directors, a Swiss individual Irene Spoerry, Petros Livanios of Cyprus and Andreas Moustras of British citizenship. The three, who seemed completely unrelated with the Samsung chief, were identified as former and current employees of Trident Trust. Their names appeared as nominee directors from other Trident Trust managed shell companies in BVI. Thanks to the three Trident staff members, Lee was able to conceal his identity and his relationship with Bachury Finance to the regulators. 

Lee’s name appeared in the company’s Register of Members document. According to the Trident Trust internal documents, the share capital of Bachury Finance was USD 50,000, issued with 50,000 shares worth USD 1 each. Lee was the sole member shareholder. The document included a Certificate of Shares, which was issued to Lee with his Hannam-dong address. The certificate was issued as of May 2, 2008, the day Lee seemed to purchased the shelf company from Trident Trust and obtained the shares. 

The Trident Trust’s internal documents included an invoice, which Trident Trust issued to Lee for Bachury’s incorporation and management for the year. In this document, Lee was named as the company’s beneficial owner. 

In short, the BVI company Bachury Finance Corp., which Samsung Electronics Vice Chairman Lee Jae-yong obtained in 2008, seems to be a classic shell company with nominee directors. Information on the original source of funds and beneficial owner was only available within service providers like the Trident Trust.

Why would Lee have obtained the offshore shell company? No traces of Samsung Group were identified from Bachury Finance’s documents, besides the name of its de facto chief Lee Jae-yong. Newstapa concluded Lee obtained this company on a personal purpose and attempted multiple times to get its questions directly to Lee himself.

Newstapa tried to get the written questions to Lee’s Hannam-dong residence, but was stopped by the security. The reporters sent out the letter in registered mail twice, but the letter returned both times. The reason of return was refusal from the recipient. 

As the final attempt, the reporters asked the Samsung Electronics PR team to deliver the letter to Lee. After a week, the company didn’t respond but repetitively said it is still reviewing the matter internally.

The particular timing that Lee acquired Bachury Finance bears a special meaning.  

On October 29, 2007, Kim Yong-chul, a former chief lawyer for the Samsung group, disclosed details on allegations that the conglomerate had been operating slush funds. Kim’s claim led to a four-month long investigation by special prosecutors from January 2008. Then on April 14, the team led by Cho Joon-woong announced the results. The investigation revealed that Samsung had been secretly operating the slush funds of Chairman Lee Kun-hee. The amount of 4.5 trillion won was kept in nearly 1,200 borrowed name accounts of its employees. 

But the special prosecutors' probe has ended after only scratching the surface. Special prosecutor Cho announced his team did not dig into the alleged overseas slush funds of Samsung. They said it was practically impossible to investigate.  

Newstapa's latest investigation reveals that Samsung's then-heir Lee Jae-yong set up a secretive shell company in a tax haven when the company and its chairman Lee Kun-hee were undergoing the greatest challenge.  

 “The special prosecutors investigating Samsung have found the group’s hidden assets of of 4.5 trillion won but did not look into its overseas slush funds. Lee Jae-yong’s offshore company may have been used to siphon off his undisclosed domestic asset overseas or to move hidden overseas assets to a safer place,” said Yun Yeong-dae, co-representative of the Spec Watch Korea, an independent speculative fund watchdog.       

Since 2013, Newstapa has been tracking tax havens and discovered many suspicious cases linked to Samsung. The following is the list of our previous reports on Samsung's alleged slush funds and money laundering. 

-A secret Swiss bank account bearing the address of Samsung headquarters (2015) 

-Samsung sends tens of billions of won to its overseas affiliate through a shell company (2017)

-100 billion won sent to Samsung’s overseas affiliate through a shell company (2019)

-Samsung’s suspicious transactions are caught by the U.S. financial authorities (2020)