The Korean Gallery Owner and the Slush Funds

Hong Song-won of Seoul’s Gallery Seomi was arrested for her role in selling 10 artworks owned by the daughter of a Korean Chaebol head and wife of the current Chairman. The 10 works were sold before Korean courts could seize 330 works of art in a storage facility which authorities sought in a tax evasion and embezzlement case against the couple. But the more valuable information in this story is the way in which wealthy Korean families have been using art works to fund and facilitate illicit payments.

Here is where Hong Song -won’s story becomes relevant:

Korean chaebol owners often collect artwork using slush funds as the value of the pieces changes frequently, and it is easy to avoid tax.

Her name first came to the fore in 2008 when an independent counsel investigated the allegation that Hong Ra-hee, director of Leeum, Samsung Museum of Art, purchased Roy Lichtenstein’s 1967 painting “Happy Tears” and other pieces through Seomi using part of a slush fund raised by Samsung. The gallery head disclosed the painting, claiming she had bought it and it was kept at her storage facility.

Three years later, Hong returned to the spotlight after she filed a 5 billion won lawsuit against Hong Ra-hee. The Seomi director accused Hong Ra-hee and the Samsung Foundation of Culture of paying just 25 billion won of an outstanding bill of 78.1 billion won for 14 works of art purchased between August 2009 and February 2010. But she later dropped the case, saying “the misunderstanding was straightened out.”

In October 2011, Hong Song-won was given a suspended two-and-half-year jail term for helping Orion Group Chairman Tam Cheol-gon hide illegal funds through purchasing artwork and laundering money via trading certain pieces.

She later was also involved in similar cases with former National Tax Service Commissioner Han Sang-ryul and Namyang Chairman Hong Won-sik, which involved the late artist Choi Wook-kyung’s “Hakdong Village.”

Most recently, she was investigated over suspicions of assisting the CJ Chairman Lee Jae-hyun by inflating the cost or forging papers in the purchase of artwork. Lee and his family allegedly purchased a total of 138 famous paintings worth 142.2 billion won through Gallery Seomi between 2001 and 2008. Among the items are high-value pieces by leading contemporary artists such as Andy Warhol and Jeff Koons.

Downfall of art dealer tied to chaebol