Embezzlement 2: Kook Jin?
[Translator’s note: Original file in Korean has some mistakes that were directly translated. But most of the text is accurate.]
Background of how Kook Jin Moon came to own Saeilo Enterprises (KAHR’s parent company) and some of its problems
On March of 1993, Saeilo Machinery (USA) was a company under One Up (1UP) Enterprise which was under UCI. 1UP owned 94% of Saeilo Machinery’s shares. On April of 1994, chairman Kook Jin Moon (from here on Kook Jin Moon) acquires 49% of the shares of Saeilo Machinery for the price of $807 dollars. On February of 1995, Kook Jin Moon establishes Saeilo Inc. as an independent legal entity and begins the Kahr Arms Division. This company’s shares belong 100% to Kook Jin Moon, but it has yet to be revealed how much he himself invested into the company. On February of the same year, Kook Jin Moon received $2 million dollars from 1UP Enterprise. After that, on April of the same year he receives an additional $3 million dollars. The total $5 million dollars that he received were invested into his company and represent 20% of the total amount of shares. At the time, Saeilo Inc.’s ownership structure was that Kook Jin Moon owned 77%, 1UP owned 19%, and SEI* owned 4%.
*SEI stands for “Saeilo Equity Investments Limited Partnership” and is owned by Kook Jin Moon.
In July of 1999, Kook Jin Moon founds Saeilo Enterprises Inc. And he takes over the entire company by merging Saeilo’s shares through a 30:1 share swap, and by putting all the Saeilo affiliated companies under Saeilo Enterprises Inc.
On September of 2003, Kook Jin Moon makes a proposal to UCI stating that he would repurchase the 20% share ownership of Saeilo Enterprises held by 1UP (which is under UCI) at the price of $1 million dollars. And on December of the same year Kook Jin Moon makes an agreement with Dong Moon Joo, who was the president of UCI at the time, by which the shares of 1UP are given to Kook Jin Moon for the price of $1 million dollars. As a result of that, Kook Jin Moon came to become 100% the sole owner of Saeilo Enterprises and the Kahr Arms business.
When Kook Jin Moon does interviews with the press he proudly introduces Kahr Arms as a self-made company and he emphasizes that it belongs to him. However, if one studies the 10 year period from 1993 until 2003, there are certain parts that show that his statement is not exactly accurate. There are suspicions that he used special relationships to privatize assets.
On March of 1993, Kook Jin Moon took responsibility over Saeilo companies at his father’s request. The companies were in a deficit. At the time, 1UP, which is affiliated to UCI, owned 94% of Saeilo’s shares. But in 1995, Kook Jin Moon changes the focal point of the company to focus on manufacturing weapons, establishes Saeilo Inc. which was a company that Kook Jin Moon owned 100%, and received a $5 million dollar investment from UCI. Without certain trust between Kook Jin Moon and the Tongil Group it would have been nearly impossible for a person in his twenties fresh out of university to receive a $5 million dollar investment and to allow him to decide that that investment only represents 19% of the total equity.
As a graduate of Harvard’s finance program, Kook Jin Moon showed promise in business and had relative success in the weapon’s manufacturing business. But on September of 2003, 8 years after he started the gun manufacturing business, he makes an incomprehensible proposal to UCI. Normally, a person would allocate some revenue for the company that trusted and helped him (in this case UCI) start out from a penniless situation, but instead Kook Jin Moon proposed that he will buy back the $5 million dollars worth of shares from UCI for the price of $1 million dollars.
Although the revenue structure of Saeilo Group was in a deficit, Kahr Arms was clearly making a profit. And Saeilo Enterprise’s books show a total amount of $7.04 million dollars with $17.03 million in net sales. Just by bookkeeping alone one could calculate that the shares of UCI were worth 1.4 million dollars, and from a net sales perspective it was $3.4 million dollars.
From the perspective of an investor who sees the business possibility of Kahr Arms and sees that it’s making a profit and perceives that it might have a bright future, would that investor dump and sell its shares for less than what they are worth? It wasn’t that UCI was desperately in need of that $1 million dollars either. A person (B) who has been investigating this situation explains that normally it would be impossible to come to such an agreement without special relationships or interests involved, and that this could be seen as unfair insider trading. At that rate, it could almost be considered stealing.
At the time they hired an accounting firm named “Grant Thorton”, but this was simply a formal process to avoid an audit by the IRS. Rather than do an independent study of Saeilo Enterprises, Grant Thorton submitted a brief 1 page report based on the information that it received from the company that from a market value perspective it was within a fair range to acquire the shares at $1 million dollars. In the end Kook Jin Moon acquired the shares for next to nothing simply with Dong Moon Joo’s signature on an agreement. There is no proof that Father approved of any of this in any part of the process.
Chairman Kook Jin Moon borrowed his father’s influence to start a business, and later through another separate deal he was able to make the entire business into his personal company. However, for the last few years Kook Jin Moon has been inflating his business record to promote to the press and even bringing shame upon his religious father by having his wife model as a sexy gun girl for his company. There are other unresolved questions that will have to be brought to light.