Activist fund Elliot Advisors is seeking compensation from the Korean government for its role in a controversial intra-Samsung merger in 2015 that led, in part, to the downfall of former president Park Geun-hye and to the jailing of Samsung heir apparent Lee Jae-yong.

In 2015, Elliot objected to the merger of Samsun C&T Corp with Cheil Industries Inc. The US fund claimed that the merger was unfair for Samsung C&T shareholders such as itself, but an intervention by the state-run National Pension Service led to Elliot’s defeat in the proxy fight.

In a statement posted on Business Wire on May 1, the fund said: “Elliott is seeking to negotiate with the Republic of Korea (ROK) regarding compensation for Elliott’s damages arising from the former administration’s unlawful intervention in the merger of Samsung C&T and Cheil Industries.”

The statement cited a clause in the Korea-US (KORUS) Free-Trade Agreement, for investor-state negotiations and damages. “The actions by the former administration and the National Pension Service (NPS) were in breach of KORUS FTA and constituted manifestly unfair and inequitable treatment of Elliott.”

In what may be an appeal to the liberal administration of current President Moon Jae-in, which has vowed to root out the “deep-seated evils” – such as collusion, cronyism and corruption – of previous Seoul governments, the statement continued: “The scandal that has unfolded around the merger has led to the impeachment and removal of then-President Park, as well as a number of criminal trials and convictions in [Korean] domestic courts, including those of senior Samsung executives, the former Minister of Health and Welfare, and the former Chief Investment Officer of the NPS.”

‘Corruption from President down..’

As a result, “… the web of corruption reaching from the President herself down to the NPS, unfairly damaged Elliott and other Samsung C&T shareholders,” the fund finished.

At the time of the controversy, the state-run Pension Service held an 11.21% stake in Samsung C&T, while Elliott held 7.12%. In a move that raised questions among both the public and media, the NPS, after a closed-door meeting, gave a green light to the merger.

The deal was widely seen at the time as a step to cement Lee’s control over Samsung overall. But after massive protests led to the impeachment and eventual overthrow of Park, it emerged that Lee had held discussions with Park, paid into funds controlled by her crony Choi Soon-sil, and even bought a dressage horse for Choi’s equestrian daughter.

Park is currently serving a 24-year jail sentence and Choi a 20-year term.

Lee was sentenced to over five years in a related case, but released in February after a year behind bars with a suspended sentence of two and a half years. He has returned to his position at the head of group flagship Samsung Electronics, which he has de facto headed since his father Lee Geun-hee was incapacitated by a stroke in 2014, which he is not expected to recover from.

According to South Korea’s Yonhap news agency, Elliott filed a notice of intent with South Korea’s Ministry of Justice last month. The notice asks whether the government intends to settle with Elliott before the fund files a suit with the International Centre for Settlement of Investment Disputes. Elliott could begin action against Seoul at the Washington-based organization three months after sending the notice, Yonhap reported.

Another fund which suffered a bruising experience in South Korea, a Belgium-registered entity of Texas-based Lone Star Funds, became the first foreign investor to engage the South Korean government in international arbitration in 2012. The fund is suing Seoul for a whopping US$5 billion in lost earnings, related to the acquisition, turnaround and eventual sale of Korea Exchange Bank, which the fund acquired as a distressed asset. The case is ongoing.