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Samsung Denies Corruption Charges
by
findingDulcinea Staff
The largest conglomerate in South Korea faces bribery allegations; the case is the latest in a number of investigations into the senior executives of the nation’s dominant, family-owned corporations, the “chaebol.”
30-Second Summary
On Oct. 29, 2007, former Samsung legal adviser Kim Yong-cheol accused the Samsung Group of bribing public officials from a $220 million slush fund.
With nearly 60 affiliates, the company accounts for approximately one-sixth of South Korea’s gross domestic product and about one-fifth of the country’s exports and stock market value.
More than a financial giant, "Samsung's influence surpasses the economic level and reaches out to influence politics, society, culture and even ideology,” Kim Sang-jo, executive director of the group Solidarity for Economic Reform, told Reuters.
In the extent of its influence, Samsung is a representative example of the family-owned chaebol conglomerates, which are typically authoritarian in management and politically influential.
For decades the chaebol have commanded respect in South Korean society for pulling the nation out of the difficult times following the 1950–1953 Korean War.
In the past year, however, some commentators have detected a sea change in the nation’s attitude to the chaebol.
Both the Chairman of Hyundai Motor Company Chung Mong-koo and Hanwha Group Chairman Kim Seung-youn have been involved in separate scandals, though they emerged with relatively minor penalties.
The courts justified the lenient sentences applied on the grounds that the economy would suffer if these chief executives were unable to do their jobs.
The current situation differs from those earlier cases in that it involves a whistleblower who claims to have witnessed corruption firsthand.
That said, Yonsei University Economics Professor Sung Tae-yoon argues that the national stakes remain the same. “If Samsung’s business started to shake, ordinary people would feel the effects,” Tae-yoon told Reuters.
In contrast, Bloomberg News columnist William Pesek writes that this could be South Korea’s “Enron” moment, a purge that will be beneficial to the country in the long run.
With nearly 60 affiliates, the company accounts for approximately one-sixth of South Korea’s gross domestic product and about one-fifth of the country’s exports and stock market value.
More than a financial giant, "Samsung's influence surpasses the economic level and reaches out to influence politics, society, culture and even ideology,” Kim Sang-jo, executive director of the group Solidarity for Economic Reform, told Reuters.
In the extent of its influence, Samsung is a representative example of the family-owned chaebol conglomerates, which are typically authoritarian in management and politically influential.
For decades the chaebol have commanded respect in South Korean society for pulling the nation out of the difficult times following the 1950–1953 Korean War.
In the past year, however, some commentators have detected a sea change in the nation’s attitude to the chaebol.
Both the Chairman of Hyundai Motor Company Chung Mong-koo and Hanwha Group Chairman Kim Seung-youn have been involved in separate scandals, though they emerged with relatively minor penalties.
The courts justified the lenient sentences applied on the grounds that the economy would suffer if these chief executives were unable to do their jobs.
The current situation differs from those earlier cases in that it involves a whistleblower who claims to have witnessed corruption firsthand.
That said, Yonsei University Economics Professor Sung Tae-yoon argues that the national stakes remain the same. “If Samsung’s business started to shake, ordinary people would feel the effects,” Tae-yoon told Reuters.
In contrast, Bloomberg News columnist William Pesek writes that this could be South Korea’s “Enron” moment, a purge that will be beneficial to the country in the long run.
Headline Link: Investigators expand Samsung probe
As of December 2007, South Korean officials have expanded their investigation into the charges leveled against the Samsung Group. The company has vehemently denied the corruption allegations against former executive Kim Yong-cheol and has managed to emerge relatively unharmed from similar accusations in the past. However, if officials conclude that the company is in fact guilty, the sheer magnitude of its contribution to the national economy could pose a quandary for investigators. As Reuters notes, Samsung “accounts for about one-fifth of the country's exports and stock market value,” and is revered for its role in saving South Korea from its economic troubles following the 1950–1953 Korean War.
Source: The New York Times
Background: A rash of corporate scandals in South Korea
Samsung
On Oct. 4, 2007, two Samsung executives were convicted of selling bonds to Chairman Lee Kun Hee’s children at prices below market value. Hur Tae Hak received a prison term of three years, but it was suspended for five years; and Park Ro Bin was sentenced to two years in prison, which was suspended to three years. According to the International Herald Tribune, the suspended sentence means that neither man will serve jail time unless he commits a crime during the suspension period.
Source: International Herald Tribune
Hyundai
In February 2007, chairman of Hyundai Motor Company Chung Mong-koo was sentenced to three years in prison on charges of embezzlement and breach of trust for creating a slush fund used to bribe public officials. Hyundai, like Samsung, is one of the large conglomerates responsible for spearheading South Korea’s economic development. The judge in the case handed down a relatively light three-year sentence, citing Chung's "big contributions to the development of the country's economy," reports the BBC.
Source: BBC
Chung’s three-year prison term was suspended in September 2007 after he was deemed too important to South Korean society to remain in jail. After consulting with peers, high level officials and, according to the Associated Press, “taxi drivers and restaurant employees,” Judge Lee Jae-hong said he was “unwilling to engage in a gamble that would put the nation’s economy at risk.”
Source: MSNBC
Hanwha Group
Hanwha Group chairman Kim Seung-youn was convicted of abducting bar workers and assaulting them with metal pipes in retaliation for an attack on his son. However, in September 2007 Kim had his 18-month prison term suspended. His jail time was replaced with 200 hours of community service and a three-year suspension.
Source: Reuters
Opinion & Analysis: Whistleblowers and transparency
KBS WORLD Radio, Korea’s only foreign-language promotional broadcaster, examines whether Kim Yong-cheol, the former legal adviser to Samsung, should be reprimanded for whistleblowing. While American and British societies protects whistleblowers, KBL asserts that “in Korean society, which treasures hierarchy, whistleblowers are considered ‘informants’ and subjected to various disadvantages.”
Source: KBS Radio
Bloomberg News columnist William Pesek claims that the Samsung scandal could pave the way for an “Enron” moment in South Korea. Just as the Enron scandal resulted in substantial corporate accounting reform in the United States, Kim’s testimony could be lead to more transparency in South Korea’s business practices.
Source: Bloomberg
Key Player: Samsung and Kun-hee Lee
A May 2005 Wired article titled, “Seoul Machine,” charts Samsung’s rise to power in the 1990s and 2000s, highlighting the company’s integral relationship with South Korea. Kun-hee Lee, son of the company’s founder, helped make Samsung the international force it is today by creating “a global mega-corporation that's run as a very old, Korean-style company," Wired quotes an insider as saying. The company now produces high-quality products with a more refined and unique design than in the past, helping to revitalize a country that used to rival “Ghana on the poverty scale,” Wired reports.
Source: Wired
Related Links: South Korean society
In late November 2007, the Los Angeles Times published an article associating the spate of South Korean scandals with the cutthroat atmosphere of South Korean society. The Times suggests that incidents regarding fabricated university credentials, presidential nominee fraud allegations, and the Samsung controversy may all relate to South Korean society’s innate competitiveness. "In the competition to be ahead of others, people resort to any means available, resulting in corruption," according to Kim Mun-cho, a Korea University sociologist.
Source: The Los Angeles Times
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