Top Samsung Exec Faces Arrest in Massive Corruption Scandal

Photo: Getty
Photo: Getty

South Korea is in political chaos after the recent impeachment of its President, Park Geun-hye, and now, the charges of corruption are spreading to the highest levels of Samsung. A prosecutor is seeking the arrest of the company’s vice chairman and de facto leader, Jay Y. Lee.

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Samsung’s official chairman, Lee Kun-hee, has been out of the public eye since he suffered a heart attack in 2014. His father, Lee Byung-chul, founded the company and his son Jay is known in South Korean media as the “Crown Prince of Samsung.” But special prosecutor Park Young-soo has asked a court to issue an arrest warrant for Jay Y. Lee that could derail the dynastic transfer of power.

The New York Times reports on the connection between Samsung and the impeached president, Park Guen-hye.

Mr. Lee is accused of instructing Samsung subsidiaries to make payments totaling 43 billion won, or $36 million, to the family of Ms. Park’s confidante, Choi Soon-sil, and to two foundations Ms. Choi controlled in exchange for help from Ms. Park in facilitating a father-to-son transfer of ownership control of Samsung.

It could take a few days for the courts to make a decision about the arrest warrant. If it is approved, Lee could face charges on bribery and embezzlement.

Park’s ongoing trail has included accusations that Samsung paid Ms. Choi to support the merger of two Samsung affiliates back in 2015. Moon Hyung-pyo, the chairman of the National Pension Service has been accused of illegally pressuring the fund to support the merger and he was indicted on Monday.

If Mr. Lee is charged, that would not necessarily mean an end to his career. Samsung is South Korea’s largest company and its Samsung Electronics division accounts for 20 percent of the country’s exports. Lee’s father, the current chairman, has previously been convicted on charges of bribery, tax evasion and helping his son illegally buy stock in a Samsung subsidiary at a reduced price. He served no jail time and is still in charge.

For its part, Samsung has released a statement denying the allegations of bribery or “improper requests related to the merger of Samsung affiliates or the leadership transition.”

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[New York Times via The Verge]

DISCUSSION

By
Josey Wales, Esq.

South Korea’s chaebol system is fascinating. Roughly 60 years ago, South Korea was behind Haiti on a list of the world’s most impoverished nations, and it is now the 13th largest economy in the world. Pretty impressive for a small, mountainous country with relatively little arable land and sparse natural resources. This was due in large part to the success of companies like Samsung and Hyundai had in exporting all manner of products. In exchange for their success in exporting goods, these companies received tax incentives and favorable loan terms from the Korean gov’t, lead by Park Chung-hee (father of the current President), and the ability to maintain familial control of the company despite the fact that the shares of the firms are, in many cases, publicly traded. This system, which indisputably helped South Korea’s rise from a poverty stricken land to one of great international significance, is also seen as the root of the corruption that has long plagued government. Really a fascinating country.