The following is an account of the court hearing that was held on March 15, 2011 on the case between JYJ and SM Entertainment for invalidation of JYJ’s contract with SME.
The summary was provided by a fan, and he/she noted that he/she is writing on whatever he/she heard that day at the trial and because she has no knowledge about laws, there might be discrepancies
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Yoon Sung**, the person responsible for balancing SM’s accounts, moved to the witness seat.
For about an hour and a half, there would be interrogation from both sides. The questioning was mostly based on the various account balance documents that were submitted late by SM.
Because it’s a trial, the judge will have to make a decision of the sentencing after the trial, so the atmosphere today is a little stifling.
As a reference, the judge in charge today has been changed.
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Questions from SM’s lawyer.
Person to answer: Yoon Sung**, the person in charge of balancing accounts since the latter half of year 2007.
(They spoke about SM’s bookkeeping during the 6 month period)
Q: Did any of the artists under SM ever mention any recommendations/proposals about the inconvenience of the balance account?
A: No.
Yoon & SM’s lawyer checked the breakdown of SM artists’ income detail list. In the list, income, expenses, advance payout details, receipts are all included and the balance account statement has been revealed.
Yoon states that the balanced account statement will be revealed to the manager, family members of JYJ, and JYJ members if they request for it.
Q: With regards to the claims that 5 members were held accountable for expenses related to overseas activities…
A: Air tickets, accommodations… and any expenses related to the activities were covered by the company. Neither 3 nor all 5 members of TVXQ were forced to one-sidely account for those expenses.
Q: With regards to payments that were made in advance.
A: Regardless of the entertainment activities, the company will pay out (those advances) if it has been requested personally. Usually, these requests are made in the pretext of personal insurance payments, tax payments, fines or penalties, housing expenses, educational expenses and much more. The requests are made through their manager via the usual application procedure; the payout is made after the approval from the finance director and the CEO.
(Writer’s note: The amount of advance payment was quite large. It was about USD 900, 000 for all 3 of them…. Why did they have to receive such a large payout when they’ve earned so much money already? [T/N: Why didn’t SM just give out their earnings in the first place to allow the 3 members of pay taxes? Why did they give out these advanced payments instead?])
The payment has been reflected as money paid in advance on the nominal accounts. It will be reflected as a loan and normal employees have to pay interest when they request for these advance payments.
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Questioning by SeJong
Person to answer: Yoon Sung**, the person in charge of balancing accounts from the latter half of year 2007.
Q: During the meeting for revenue calculations, JYJ members, finance director, parents, and manager have attended. However, has there been a time when a legal expert or a financial expert took part in the meeting?
A: Occasionally there is. However, the 3 members have never requested for that.
Q: When calculations and checking of the revenues are made, you mentioned all the details/breakdown are cross-checked in 6 month periods… you show [the document] and get [the artist’s] signature, but do you show all revenue-related documents such as the contents of the bank account, receipts, album contract, commercial contract, overall contract and so forth?
A: We’ll show them if they request for it. But the 3 of them has never requested it.
(Writer’s note: so does this mean that JYJ has never seen such documents before?)
Q: There probably are circumstances whereby no contracts are written and transactions are made through cash. Under these circumstances, are there any ways that JYJ will be able to check and rectify the contents?
A: No.
They spoke about issues with regards to the calculation of accounts for the latter half of year 2008, from July until the end of the year, including commercials, photo book, goods, overseas activities revenue calculations, local album sales revenue (Mirotic), and so forth…
Q: For example, were the payouts for attendance of fan sign meetings and other 60 small or so activities and publications events revealed?
A: We never did. These are not subjects of accounting calculations. And, small amounts of attendance payouts are not subjects of accounting calculations (those about 20~300, 000 Won; USD200 ~ 270). They had many activities that DIDN’T have payouts for attendance. Under the contract terms, the full amounts of revenues for those non-regular activities like publicity events will all go to the company [T/N: BTW, these “non-regular” activities include the regular appearances TVXQ had on music programs such as music core, popular song, music bank, etc. AND their appearance on variety shows such as X-Men, Happy Together, Come and Play, etc.]
[T/N: is a contract which provides no compensation for an activity, however small, really fair? 60 or so small events paying out about USD 200-270 each really does add up. And think about how many of these small events TVXQ must have had throughout their career].
From the money earned from TVXQ’s activities, fees such as transportation, food and snack expenses, are all shared among the members and company under a proportional rate.
Q: In 2009, for the incomes which falls under digital music, 10% has been accounted for in the account balance calculations. However under the distribution allotment [of the contract], from the total revenue amount of USD 530, 000, there should be a payout of USD 58, 000 but there was none.
A: I’m unsure about this.
Q: From 2007 to 2008, under the contract which promised [TVXQ] a payout of USD 3 million for attending Seoul and Asia concert-related events, the public relation agency promised to account for all related expenses. However, TVXQ was charged USD 800,000 for expenses [T/N: under the contract, this should have been covered by the public relation agency]. Why is that so?
A: I’m not sure.
Q: With regards to albums, once the sale of the albums has started, there will be one balance calculation after 2-3 months. Is there no more balance calculations with regards to album sales after that?
A: During the calculations, we will have a forecast of the possible album sales after that [2-3 month] period of time and make payouts based on forecast.
Q: For instances like the Mirotic album, the album sales was a total of 540, 000 copies. The initial sale was over 460, 000 copies for a period of 4 months. Based on the balance calculations on 5th February 2009, about 12, 000 copies extras were considered so for convenience sake 480, 000 copies to be sold were forecasted and put into calculations. HOWEVER, if the sales EXCEEDS 500, 000 copies, there was a condition stated on the contract that there would be an ADDITIONAL payout of USD 44, 000 to each of the members. Perhaps, it is because of this that there was a RUSH to conclude that the album sales would be of 480, 000 copies?
A: I don’t know.
Q: After Mirotic, was there an additional payout of USD 44, 000?
A: NO. From what I know, the album has not exceeded [500,000 copies]. [T/N: Actually, according to a statement released by SM themselves on 1/8/2009, SM states that “Mirotic” exceeded selling 500,000 copies (502,837 albums total on 1/8/09) source – http://www.mydaily.co.kr/news/read.html?newsid=200901080837271131. Where is the USD 44,000 that SM owes to each member?]
Q: Under instances that the sales exceed 200, 000 copies, [members] are promised a payout of 5% of the album sales but, based on the album sales of USD 3.7 million, (the payout) should be over USD 176, 000. Why was USD 88, 000, an amount much less than 5%, given as the payout?
A: it’s not 5% of the lump sales, but based on section criteria. Like, how many percentage if it’s over 10, 000 copies and how many percentage if it’s over 100, 000 copies. Using this method, the payouts would fall between 2~5% (of album sales).
Q: It is said that the members would not need to be accountable for any expenses in relation to album production. What are the categories that this particular expense falls under?
A: Filming of jacket, printing expenses, recording expenses, songs fees (T/N: payment for copyright of songs), filming of MV, dance chorography are all… inclusive..
Q: However, (looking through expense report) MV production fees, showcase fees, and even international calls fees are all being accounted for by the members… why?
A: it is not everything, but there were probably parts of the expenses that were being used for broadcasts. From what I know, those kinds of expenses are being categorized as PR expenses. [T/N: Refer back to Yoon’s answer in the previous question. He HIMSELF stated that expenses for MV production were inclusive in SM’s coverage for album production. He is contradicting himself here.]
Q: Under the exclusive contract, production fees are being termed as operating expenses, so the company and members are both accountable for these expenses. However, members were held accountable for accommodation expenses, cleaning lady expenses, parking expenses, car gasoline expenses, external security expenses. Why?
A: I’m not too sure. The payment document that came from the production team has different colors and differentiates accordingly… the finance department will then classify those accordingly. [T/N: according to reports from fans who got a close look at SM’s expense report, SM held members accountable for the smallest things such as Junsu’s cold medicine -_-]
Q: With regards to issues of overseas revenue in 2008, TVXQ only is responsible for making USD 880, 000. Who is responsible for the remaining USD 11, 500,000 worth of revenue? SNSD started their activities in Japan in 2010 August. Who are the ones who brought in those revenue?
A: The revenues come from Go Ara, Trax, CSJH, BoA’s activities. (Writer’s note: Everyone present laughed.) And, the company has other revenues that have nothing to do with all these artists. Japanese activities have accounted for 70%.
[From @Spring_Breezes:
Boa, CSJH and the Trax ALTOGETHER sold the following number of albums and DVDs in 2008. : 65,750 (single album), 185,388 (reg album), 25,695 (DVD). Go, Ara did one drama “누구세요” (“Who Are You?) in 2008 according to wikipedia.
I’m sure these artists generated other types of revenue for SM other than what’s listed above. They are talented ppl and fans loved/still love them. But loyalties from these four artists/groups for 2008 is… 13.7 billion KRW? Really? Based on the number of albums and DVDs sold in 2008, it’s hard to believe that they made that much in 2008, don’t you think?
Cr: 김떡뽂 at DC Inside + wikipedia ]
Q: According to Japan Tax Law, after calculations of the Japan tax, (roughly USD1.1 million) the payouts are made, and of course after the deduction of corporate tax in Korea, USD 1.1 million should have been received… how was that portion of the money being accounted for?…
A: (the question was ambiguous so it was passed)
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(Writer’s Note: The hearing ended with talks about the next hearing which will take place on 19 April at 2pm.)
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Translation by. Inhye87 of withJYJ
Edited by. withJYJ
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