SM Entertainment CEO Chris Lee has released a scathing video accusing the company’s founder of tax evasion and delaying Aespa’s comeback album.
Chris Lee, born Lee Sung-su, goes on the offensive against his own uncle, Lee Soo-man, in a 30-minute video uploaded to his YouTube channel on Thursday.
In the video, which is labeled as being part one of a series, he makes several bombshell accusations and declares, “We as members of SM Entertainment cannot stand by and watch the company be controlled by Lee Soo-man.”
According to Chris, Lee Soo-man has engaged in offshore tax avoidance since the 2019 founding of Hong Kong-based production company CT Planning (CTP) Limited.
Chris alleges that CTP takes 6% of SM Entertainment’s revenue before it is divided with overseas distributors.
The CEO compares this arrangement to one SM had with Lee Soo-man’s other private company, Like Planning, which collected up to 6% of SM’s annual revenue under consulting and production fees. Through this, Like Planning accumulated over $109 million over the past 20 years.
“The contract between SM Entertainment and Like Planning was deemed invalid in both 2014 and 2021 and resulted in SM Entertainment paying back trillions of Korean won in back taxes,” Chris claims. SM terminated ties with Like Planning on Dec. 31, 2022, but are still connected to CTP.
Chris further alleges that Lee Soo-man had SM conjure a consulting agreement to legitimize his actions and had artists sign a separate contract with CTP for other promotions.
He also alleges Lee Soo-man undermined revenue reports to convey the label was in need of his guidance to turn a profit.
Even after he stops producing, SM would need to pay Lee Soo-man 6 percent of revenue sales from artists’ albums for the next 70 years, as well as 3 percent of management revenue for three years from 2023. That’s approximately 80 billion won (approximately $61 million). I was so ashamed to meet SM’s employees, artists and all of our investors.
Chris also blames Lee Soo-man for the delay in Aespa’s comeback album, which was supposed to be released on Feb. 20, allegedly driving its members to tears.
The K-pop quartet, consisting of Karina, Winter, Ningning and Giselle, have become synonymous with SM’s metaverse concepts. Despite this, Lee Soo-man allegedly ordered the company’s Artist and Repertoire team and longtime in-house producer and songwriter Yoo Young-jin to insert themes and elements of environmental sustainability into SM artists’ songs.
Lyrics for a now-scrapped Aespa song included phrases like “lowering by one degree.” Buzzwords in English lyrics included “sustainability” and “greenism.”
“These words that have no relation to K-pop at all appeared in the lyrics here and there. The early part of the song even contained ‘planting trees,’” Chris says. “The Aespa members were so upset they even got choked up [with tears].”
He states that Lee Soo-man’s vested interest in ESG (environmental, social, and corporate governance) initiatives were due to personal real estate dealings and casino plans where people could smoke marijuana.
On Thursday, Lee Soo-man responded to Chris’ video expose, but did not comment on any of the specific allegations.
I’ve watched my late wife’s nephew grow up since he was 4. He’s been with me since he entered SM Entertainment at 19 years of age, working on managing fans. He’s a kind nephew who grew up in a family with his father a pastor. My heart hurts.
The family schism comes on the heels of HYBE, which houses K-pop groups like BTS, SEVENTEEN, LE SSERAFIM and NewJeans, becoming the largest shareholder of SM Entertainment last week with a 14.8% stake after buying 3.5 million shares.
HYBE also offered to buy an additional 25% stake from minority shareholders.
HYBE’s actions have been wildly divisive among netizens and even some of SM’s own employees. HYBE CEO Park Ji-won said his company will “ensure” that SM maintains its independence.
HYBE also refuted Chris’ allegations that the company had prior knowledge of CTP and added that they were not concerned over Lee Soo-man’s actions.
“What we have heard for the past few days are nothing but things of the past involving Lee and the current management of SM and will not affect the future to be led transparently by HYBE and SM,” Park allegedly wrote in an email sent on Friday to HYBE employees.
Furthermore, HYBE quashed any possible qualms, saying the offshore activities are a “a scenario that can never occur” and that they can terminate the contract with CTP because Lee Soo-man not having business ties with SM was part of the prerequisite for their deal to have HYBE become majority shareholder.