Paul Singer's Elliot Vulture Fund at Center of South Korean Impeachment Scandal

January 6, 2017

The impeachment trial of South Korean President Park Geun-hye is ongoing, but a recent move by the prosecution has shined a new light on the case — that the notorious vulture fund Elliot Management (the same fund which plays a leading role in the destruction of Argentina and many others) is at the middle of the case.

Last week, South Korean prosecutors arrested Moon Hyung-pyo, who heads the National Pension Service (NPS). He was charged with ordering the NPS (which has an 11% stake in Samsung) to approve a requested merger of two Samsung affiliates, claiming that the approval was done at the direction of President Park and her "confidant" Choi Soon-sil, in exchange for Samsung donations of large sums to two foundations run by Choi.

However, behind all of this is the fact that the merger was necessary to preserve the ownership of Samsung by the Lee family, which founded Samsung in 1938.

Enter Paul Singer and Elliot, which, using now-infamous hedge fund tactics, organized a small-shareholder and foreign shareholder revolt against the company, demanding higher dividends, listing on the New York stock exchange, and downsizing and splitting up the company to drive stock speculation. President Park appears to have given the go-ahead to the NPS approval in order to stop Elliot's raid on one of South Korea's greatest international corporations. She may use this as part of her defense at her impeachment trial before the Constitutional Court.

Confirmation of the scam came in the form of a Wall Street Journal editorial on Jan. 3, raving against Samsung and the Park government, while presenting Elliot as the champion of the shareholders in maximizing their short-term profits, at the expense of the company. "NPS clearly acted to favor the country's most powerful conglomerate over the interests of small shareholders and foreign investors, including the U.S. hedge fund Elliott Management, which had the nerve to push back," the Urinal writes. They protest that "the chaebol [large family owned conglomerates like Samsung] continue to benefit from preferential access to capital, tax breaks, lax law enforcement and frequent presidential pardons. Consumers are stuck with less competition, higher prices and a dearth of innovation and entrepreneurship. Pensioners' stock holdings trade at a steep Korea discount because domestic and especially foreign investors fear the opacity and corporate-governance risk that come with a chaebol-dominated economy." I.e., speculation must govern industry.