South Korean entertainment giant SM Entertainment is facing lawsuits over unpaid construction fees for its ‘SMT LA’ complex, a multi-purpose entertainment building, resulting in a series of financial damages.
One contractor has even reclaimed equipment installed at SMT LA due to non-payment. Restaurant World, a Los Angeles-based restaurant equipment supplier, dismantled kitchen appliances, including sinks, on May 16. The company had not received $120,000 in construction fees.
Elizabeth Hwang, CEO of Restaurant World, said, “We’ve been working on this project for years but received no communication regarding payment from SM. While this amount may seem small to a large corporation, it is a significant blow to small businesses like ours that must cover rent and operating costs.”
As of 2022, SM Entertainment’s total assets amount to approximately 1.46 trillion KRW (about $1.074 billion).
Another Korean-operated company, S Interior, based in Torrance, is also unpaid. They are owed $15,000 for their work. S Interior’s owner, who wished to remain anonymous, said, “Last winter, SM requested our services for interior design work. I made several trips to Korea and attended numerous meetings to complete the project, but after multiple follow-ups, we received no response. We are now preparing for legal action.”
SM Entertainment had already been sued in November last year by Korean construction company Pub Construction for breach of contract, non-payment of the remaining construction fees, and non-performance of debt on the books.
Additionally, architectural firms and contractors have not received their payments from SM, further exacerbating the issue.
If the construction fees remain unpaid, it is expected that more lawsuits will follow.
Attempts to reach key SM Entertainment officials in the U.S. for an official statement have been unsuccessful as of 5 p.m. on May 20.
This incident highlights the typical unfair contracting practices and abuses of power by Korean companies toward local businesses.
Chris Lee, CEO of Pub Construction, stated, “Despite the project being halted solely due to SM’s issues, they refused to pay the construction costs. They have made unilateral claims, deviating from principles, common sense, and facts, shifting the blame for delays onto us and even notifying us of contract termination.”
The problematic building is a two-story commercial property (approximately 13,000 square feet) at the corner of 6th Street and Oxford Avenue in LA’s Koreatown. Former SM Entertainment Chairman Lee Soo-man purchased the building for $4 million in 2013. SM aimed to build a multi-purpose entertainment space in the heart of LA, leveraging K-pop’s popularity. SM Entertainment, known for producing global K-pop stars, was acquired by Kakao in 2023.
BY YEOL JANG [jang.yeol@koreadaily.com]
