Colors of money
Murky links between art, money and power paint twisted picture of the super-rich
By Kim Tong-hyung
Lim Jae-won, an independent photographer and filmmaker, wears a sad smile as he talks about Yun Hyun-soo, the troubled Korea Savings Bank chairman who also masqueraded as a photo artist, art collector and gallery director.
It bears further watching whether Yun can be anything of the above after the coming months. The 59-year-old is among the slew of savings bank owners being investigated for excessive lending and reckless management that nearly derailed their companies and trigged a secondary banking crisis here.
And what began as a housekeeping effort of financial regulators is now showing signs of exploding into a national scandal with prosecutors linking these businessmen with politicians and bureaucrats with evidence of bribery, influence peddling and cronyism.
In his personal photo-essay, ``The Secret of Aura,’’ published last year, Yun went out and defined the essence of photography as an ``invisible warning.’’ Too bad there’s nothing intangible about his mug shots splashed beneath the screaming headlines.
For a man who always carried an air of artificial elegance and self-congratulatory pomp, Yun has certainly picked an odd way to go out. Lim would have preferred that Yun never set foot in the art world in the first place.
``A lot of photographers and photo artists were surrounding him like moths to a flame. Yun lent money to a lot of these people, bought works from them and helped open exhibitions. Yes, it’s true that he was heralded as some sort of a savior in parts of our world,’’ Lim said with a shrug.
``Now these artists face the uncomfortable truth that the money Yun threw at them were actually unlawfully exploited from depositors and low-income earners that desperately depended on his savings bank. The stain and stink he left are irrevocable.’’
If the purpose of art is to provoke emotion and debate, a cynic would say it has massively succeeded in Korea. This is judging by the enormous amount of ink and electrons spent on dissecting and debating the murky connections between artists, galleries and the super-rich elite who combine to paint a picture more twisted than a Picasso corkscrew.
Leave the mansions, gems, German cars and yachts to the nouveau rich punks: For those at the very top of Korea’s social hierarchy, art has been firmly established as a medium for accumulating and transferring wealth ― glorified as a status symbol, easily cashable, and most importantly, undetected by tax authorities. These are the same reasons paintings, photos and sculptures are often the currency in political payoffs.
Come across any story about corruption and business irregularities in recent years and there is likely to be a line or two about highly-prized artwork and wheeling-and-dealing uptown galleries.
Sun Dae-in, economist and author of ``Free Rider,’’ a book discussing tax reform in Korea, observes that the bond between its art scene and wealthiest citizens exposes a failing tax system and a society in decay.
``There is a reason why Hong Ra-hee (wife of Samsung Electronics Chairman Lee Kun-hee) has been so serious about purchasing all those expensive drawings,’’ he quips.
``Slush funds created by chaebol and their unpaid taxes, which are all enabled by creative bookkeeping, are bigger beyond imagination.’’
The country’s unique cohesion between art, money and business is profoundly displayed by the slew of galleries and art museums in Seoul owned by the founding families of chaebol, Korea’s family-owned conglomerates.
Hong is a major art collector who runs the Samsung-owned Leeum Museum of Art. Noh So-young, wife of SK Group Chairman Chey Tae-won, runs ArtCenter Nabi, while Park Gang-ja, sister of Kumho-Asiana Group Chairman Park Sam-koo, is the director of Kumho Museum.
Hanjin, Aekyung, Ssangyong, Taekwang and OCI are other big companies that have art venues managed by the wives, sisters, daughters and daughter-in-laws of their chairmen.
Flying under the tax radar
The rich obviously will always try to get richer, and for Korean tycoons, collecting and moving paintings and sculptures have been a cheat key for lucrative returns.
The most obvious reason is that top-drawer paintings continue to be a great investment for those who can afford them.
The market has frequently seen the flagship works of contemporary artists like Andy Warhol and Roy Lichtenstein jump as much as 100-fold over the past 20 years, according to those in the art scene. And Warhol and Lichtenstein both happen to be popular inclusions in chaebol living rooms.
Still, it wouldn’t be much of a stretch to say that the obsession with art shown by Korea’s super-rich has everything to do with taxes.
To put it bluntly, the country doesn’t impose any taxes on the transactions of art property. Not a penny will be levied on gains from a sold painting and the buyer doesn’t have to pay registration taxes either.
Artwork is exempted from transfer and inheritance taxes too, which apparently serves as a great edge for chaebol owners who are always looking for more creative ways to transfer wealth to their children.
And as law enforcement authorities will painfully admit, these expensive paintings and drawings are elevating the art of bribery to another level. Since tax authorities have no way to track the transactions, the givers and takers will remain anonymous.
``This is something that has been going for a long time. Most of the big hands appear to have their own dealers specializing in finding and acquiring the best works for investment as well as moving them,’’ said one prominent sculptor who didn’t’ want to be named.
``It’s regrettable that the reputation of the Korean art scene is stained by the fact that it has been providing an effective front for chaebol owners to transfer wealth to their families and for companies to bribe politicians and bureaucrats.’’
The Korean market for art is estimated to be worth around 500 billion won a year. However, tax authorities barely manage to squeeze 3 billion won from the sector on taxes imposed on the revenue of galleries.
While policymakers have suggested imposing taxes on transaction income from artwork priced higher than 60 million won, the discussions have yet to progress meaningfully at the National Assembly.
``Imposing taxes on art transactions will be extremely hard, considering the difficulties in confirming ownership and rating its value. An owner could buy a 1 billion won painting and claim he bought it for 100 million, and under the current circumstances, there wouldn’t be much the authorities could do about it,’’ said Kim Yoon-seob, head of the Korean Arts Management Institute.
All the drama since Happy Tears
Lichtenstein’s ``Happy Tears,’’ which was sold for a then-record $7 million-plus at a Christie’s auction in New York in 2002 to the Seoul-based Seomi Gallery, was famously featured in a slush fund scandal that rocked the Samsung Group in 2007.
The company was exposed as maintaining a vast network of funds more than $200 million to bribe politicians, prosecutors and journalists. Investigators later found that some of the money was used by the family of Chairman Lee Kun-hee to buy expensive paintings abroad, including Happy Tears.
``Hakdong Village,’’ a painting by the late Korean artist Choi Wook-kyung, was involved in influence-peddling scandal involving former National Tax Service (NTS) Commissioner Han Sang-ryule in 2009. It was revealed that Han, when still a deputy officer of the agency in 2005, bought the painting from the same Seomi Gallery and gave it to then-NTS chief Jeong Goon-pyo in exchange for favors in personnel decisions.
And the slush-fund scandal that ripped through the Orion Group last year was connected to an ownership dispute of the Andy Warhol painting, ``Flower,’’ which had been moved through Hong Song-won, the director of, where else, Seomi Gallery. The gallery was also investigated over allegations that it laundered around 40 billion of Orion’s secret funds through art trading.
The recent efforts to purge the country’s toxic secondary banking sector are now adding to the saga with the investigations unearthing just as many precious art pieces as bad loans.
Kim Chan-kyung, the arrested chairman of Mirae Savings Bank charged with embezzling more than 500 billion won (about $427 million) in corporate wealth, has owned nine works by Pablo Picasso and Alberto Giacometti, including Picasso’s famous Le Peintre, which are thought to be worth tens of billions of won combined.
Kim, who seems as clumsy as he is shady, didn’t bring any of these paintings and sculptures to the fishing boat where he was caught in a botched attempt to flee to China just before financial regulators shut down his bank.
The task for investigators now is to find where exactly these works are being kept. Some might be hidden somewhere inside the massive storage room of Kim’s personal gallery. Some could be at other banks or any other target of Kim’s lobbying activities.
Prosecutors are already suspecting that Kim used some of the works as collateral to borrow money from the Solomon Savings Bank as Mirae’s business went into dire straits.
And yes, Solomon is another savings bank that has been suspended by regulators for poor finances and its arrested Chairman Lim Suk is a central figure in an influence-peddling and bribery scandal that could blow up in the face of President Lee Myung-bak.
``Kim made a gallery in the second floor of the bank’s Seoul headquarters and it seems that he enjoyed showing off his collections to VIP guests. He may have secretly owned more artwork and probably used some of them for under-the-table deals and lobbying,’’ said an official from the Seoul central district prosecutors’ office.
And yes, Seomi Gallery somehow found itself in the picture again. According to investigators, some of the pictures Kim used as collateral came through the gallery, which was forced to give them up after failing to repay the loans it took from Mirae.