South Korea political crisis spilled over into the corporate sector overnight, when the country’s special prosecutor on Monday sought a warrant to arrest the head of Samsung Group, the country’s largest conglomerate, accusing him of paying multi-million dollar bribes to a friend of impeached President Park Geun-hye.
Samsung Electronics vice chairman Jay Y. Lee
According to Reuters, investigators had grilled the head of Samsung, the world’s biggest maker of smartphones, flat-screen TVs and memory chips, Jay Y. Lee for 22 straight hours last week as a suspect in a corruption scandal, which last month led to parliament impeaching president Park.
The special prosecutor’s office accused Lee of paying bribes total 43 billion won ($36.42 million) to organizations linked to Choi Soon-sil, a friend of the president who is at the center of the scandal, in order to secure the 2015 merger of two affiliates and cement his control of the family business.
The 48-year-old Lee, who became the de facto head of the Samsung Group after his father, Lee Kun-hee, was incapacitated by a heart attack in 2014, was also accused of embezzlement and perjury, according to the prosecution’s application for an arrest warrant.
In a startling admission that in Korea the concept of “Too Big To Prosecute” does not hold sway, the special prosecutors’ office told a media briefing that “in making this decision to seek an arrest warrant, determined that while the country’s economic conditions are important, upholding justice takes precedence.” South Korea, an exporting powerhouse, is Asia’s fourth-largest economy.
Special prosecution spokesman Lee Kyu-chul added that prosecutors have evidence showing that Park and Choi shared profits made through bribery payments. Lee is due to appear on Wednesday morning at the Seoul central district court, which will decide whether to grant the arrest warrant.
Meanwhile Samsung, whose companies generate $230 billion in revenue, equivalent to about 17 percent of South Korea’s economy, rejected the accusation that Lee paid bribes. “It is difficult to understand the special prosecutors’ decision,” it said in an emailed statement.
Prosecutors have long been looking into whether Samsung’s support for foundations and a company backed by Choi was linked to the National Pension Service’s 2015 decision to support a controversial $8 billion merger of Samsung C&T Corp and Cheil Industries Inc. Samsung, which has acknowledged providing funds to the institutions, has repeatedly denied accusations of lobbying to push through the merger.
“It is especially hard to accept the special prosecutor’s assertion that there was improper request for a favor related to the merger or succession of control,” it said on Monday.
The special prosecutor’s office said in its indictment of Moon that Park, through her aides, ordered Moon to ensure the merger of the two Samsung companies succeeded.
Park, 64, remains in office but has been stripped of her powers while the Constitutional Court decides whether to make her the country’s first democratically elected leader to be forced from office.
Park has denied wrongdoing but admitted to carelessness in her relationship with Choi, a friend for four decades. Choi, in jail as she undergoes criminal trial and also denies wrongdoing.
On the news, shares of Samsung Electronics closed 2.14% lower, underperforming the 0.61% drop in the broader market. Investors say that while key Samsung businesses are run by professional CEOs and would not be hurt on an operational basis if Lee is arrested, his absence would slow bigger-picture decision-making. The Korea Employers Federation, a business lobby, said arresting Lee would undermine confidence both in Samsung and the country’s economy, Asia’s fourth-largest, and called the special prosecutor’s probe “very regrettable.”
The proposed arrest is merely the latest in a long strink of corporate scandals to rock South Korea, and Samsung in particular. Jay Y. Lee’s father Lee Kun-hee was himself handed a three-year suspended jail sentence in 2009 for tax evasion. He was later pardoned. Public opinion has in recent years grown less tolerant of leniency extended to the heads of conglomerates, or chaebols, for the sake of the economy.
The Samsung crackdown is the latest fallout from a political crisis that has impacted South Korea, stemming from the impeachment of president Park in December. If the impeachment is upheld by the Constitutional Court, an election would be held in two months, with former U.N. Secretary General Ban Ki-moon expected to be a candidate. Choi, in detention and on trial on charges of abuse of power and attempted fraud, again denied wrongdoing on Monday in an appearance at the Constitutional Court’s impeachment trial.
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