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"I was deceived by a forgery": Former Namyang Dairy Products Chairman Hong Won-sik wins lawsuit over 5 billion won art fraud

[비즈한국] It has been confirmed that former Namyang Dairy Products Chairman Hong Won-sik, who is currently standing trial on charges of embezzlement and breach of trust, recently won a lawsuit to cancel a contract involving the exchange of a fake artwork from a gallery for a genuine piece from his own collection. The person who handed the fake artwork to former Chairman Hong is Hong Song-won, the former head of Seomi Gallery, known as a "chaebol art dealer." The two parties exchanged the works ten years ago, with the claim that the piece was by Alexander Calder. Although former Chairman Hong trusted the former representative's word at the time, an appraisal conducted last year determined the piece to be a forgery.

On the 12th, the Seoul Central District Court (Presiding Judge Nam In-soo) ruled in a lawsuit filed by former Namyang Dairy Products Chairman Hong Won-sik against former Seomi Gallery representative Hong Song-won and her husband, requesting the nullification of an exchange between a fake artwork held by the couple and a genuine piece held by the former chairman. The court ordered that the former representative and the former chairman return the respective artworks to each other. Because the whereabouts of Hong Song-won were unknown, the trial proceeded via service by public notice, where the court posts legal documents for a set period.

The dispute began when the two parties exchanged pieces they claimed were by Alexander Calder. Alexander Calder is a 20th-century American sculptor known as the "founder of the mobile." According to the complaint, around 2015, former Chairman Hong visited a gallery operated by Hong Song-won and her husband and saw a piece titled "MISSING WING." Hong Song-won explained that the piece was a Calder, and former Chairman Hong proposed an exchange for his own Calder piece, "THE RED." The two subsequently signed a contract and transferred the works to each other.

However, the work received by former Chairman Hong was determined to be a forgery. After former Chairman Hong inquired with the Calder Foundation about the authenticity of the piece in February last year, the foundation replied that it was a forgery. They stated that the work "MISSING WING" was not listed in the foundation's computerized records and that, upon visual inspection, its production method and materials differed from those used by Calder. The Calder Foundation is a non-profit organization established by Alexander Calder's family in 1987 to collect, exhibit, preserve, and interpret Calder's work.

Consequently, former Chairman Hong filed a lawsuit to have his artwork returned. He argued that since Hong Song-won and her husband had been involved in the art brokerage business for a significant period while running the gallery, they could have easily identified that the "MISSING WING" was not a genuine Calder, yet they deceived him into the exchange contract by claiming it was authentic. Former Chairman Hong asserted that the exchange contract was signed due to fraud or duress, and that he could rescind his declaration of intent to exchange his artwork for the former representative's. Under the Civil Act, a legal act can be rescinded if there is a mistake regarding an essential part of the transaction.

The court ruled, "Defendant Hong Song-won shall return the artwork 'THE RED' to the plaintiff upon receiving the artwork 'MISSING WING' from the plaintiff." However, the court dismissed the claim filed against the husband of Hong Song-won for the same content, stating it was difficult to acknowledge that an exchange contract existed between the two parties. In addition, anticipating that his primary claim might not be accepted, former Chairman Hong had filed a secondary claim for 510 million won as a partial value of the artwork; however, as the primary claim was accepted, this secondary claim was not ruled upon. In this claim, former Chairman Hong estimated the value of his artwork to exceed 5 billion won.

The defendant, former Seomi Gallery representative Hong Song-won, is known as a "chaebol art dealer." This is because she has been pointed to as a conduit for slush funds whenever allegations of such funds within chaebol families have surfaced. During the 2008 special prosecutor's investigation into the Samsung Group, she was identified as the channel that auctioned off Lichtenstein’s "Happy Tears"—which was suspected of being purchased with Samsung's slush funds—and passed it to Samsung. In 2013, during the investigation into former Namyang Dairy Products Chairman Hong Won-sik's alleged gift tax evasion, it was confirmed that she had purchased the Andy Warhol piece "Jackie" for 2.5 billion won on his behalf. The following year, she was sentenced to prison for selling artworks that had been hidden by Lee Hye-kyung, Vice Chair of Tongyang Group, to avoid seizure.

Meanwhile, former Namyang Dairy Products Chairman Hong Won-sik is currently standing trial on charges of embezzlement and breach of trust. He is accused of receiving billions of won from suppliers in return for business deals while running Namyang Dairy Products, and causing the company losses in the 10 billion won range by inserting companies operated by relatives into the supply chain. He is also accused of appointing a supplier representative as a company auditor and receiving their salary back, as well as using corporate credit cards for personal expenses. The prosecution also indicted him on charges of orchestrating the false claim that Namyang Dairy's "Bulgaris" product had effects in suppressing COVID-19 during the pandemic, and ordering the destruction of evidence once the related investigation began.