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SM says that alleged embezzlement is fair and legal

Reporters discovered that SM Entertainment has been funneling 10 billion won or 10 million USD into founder Lee Soo Man’s personal agency.

The whole thing seemed like blatant embezzlement and because of it, SM Entertainment’s stocks dropped 10%.

SM Entertainment has just released an official statement about the accusations made against them:

This is SM Entertainment. We would like to reveal our official stance regarding the report released by a news outlet about the producing contract between our company and “Like Planning” (Lee Soo Man’s personal agency).

The producing contract between our company and Like Planning has been and continues to be one of the most important aspects of our company’s global contents’ competitiveness and growth.

Before and after being listed on KOSDAQ in 2000, we have always transparently announced our contract with Like Planning and the transactions related to it.

Regarding our contract, we thoroughly examined the precedents made by similar global businesses regarding obtaining consultation by a professional third-party organization and we followed the guidelines of those businesses accordingly.

There are no legal issues in regard to the contract with Like Planning and no unlawful internal dealings.

As a leading company in K-Pop and Hallyu, we have grown and will continue to grow. We will go on being a leading business in the global entertainment market and through the expansion of the global market and growth in profits, we plan to maximize the profits of our stockholders, employees, and artists.

Thank you.

The reporters stated that since Lee Soo Man resigned as a director of SM in 2010, he does not receive stock dividends or a wage from the company.

So they believe this is their way of paying him directly.

A securities firm researcher commented on the situation, saying that from 2015-2017, SM’s profits fell dramatically each year while Like Planning’s payments still increased.

In 2017, SM’s profits were 10.9 billion won, which is similar to the amount paid to Like Planning that year.

The research stated that those type of internal transactions could cause issues in relation to fair trade.

So what does Like Planning “do” exactly? And how much do they get to do it?

According to SM’s business report in 2017, Like Planning is responsible for producing and editing audio for SM’s artists’ albums.

For payment, Like Planning receives around 6% of SM Entertainment’s total yearly sales.

This is total sales, not just album sales.

So fan merchandise, concert tickets, etc etc, which are all things it doesn’t play a role in.

This all seems to violate ethical guidelines and of course netizens are still suspicious about the whole thing.

We’ll continue to update you guys as this situation develops.

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