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Samsung's Leader Is Indicted on Bribery Charges

The head of Samsung, one of the world's largest conglomerates, was indicted on bribery and embezzlement charges on Tuesday, becoming one of the most prominent business tycoons ever to face trial in South Korea.

The indictment of Lee Jae-yong, the company's de facto leader, came at the end of a special prosecutor's 90-day investigation of a corruption scandal that has already led to the impeachment of President Park Geun-hye. When huge crowds took to the streets in recent months to demand that she leave office, they also called for the toppling of Mr. Lee and other corporate titans.

Mr. Lee was arrested on Feb. 17, a dramatic development in South Korea's struggle to end collusive ties between the government and the family-controlled conglomerates, or chaebol, that dominate the economy.

Four other senior executives of Samsung were also indicted Tuesday, but not arrested, on the same corruption charges as Mr. Lee, and three of the four resigned. Those indictments had been expected and were not seen as indications of a threat to the Lee family's control of the business.

South Koreans have grown weary of endemic corruption and the country's traditional leniency toward tycoons accused of white-collar crimes. For decades, presidents have entered office vowing to end such favoritism, but they all eventually backtracked. Anticorruption advocates say Mr. Lee's indictment and trial will be a test of whether the system can finally make a dent in those cozy relationships.

Samsung, by far the largest of the chaebol, has long been a symbol of power and wealth in a nation that has transformed itself from an agrarian economy to one of the world's technological powerhouses. Samsung's market capitalization accounts for one-fourth of the value of all listed companies in South Korea, and its main unit, Samsung Electronics, alone ships 20 percent of the country's total exports.

Mr. Lee was accused of giving or promising $38 million in bribes to Choi Soon-sil, a secretive confidante of Ms. Park. In return, the prosecutor said in his indictment, Mr. Lee received political favors, most notably government support for a merger of two Samsung affiliates in 2015 that helped him inherit corporate control from his incapacitated father, Lee Kun-hee.

Mr. Lee was also accused of committing perjury when he insisted during a parliamentary hearing that he had never bribed Ms. Choi or Ms. Park. He still claims that the "donations" Samsung paid out to Ms. Choi were coerced, suggesting that the company was extorted.

Samsung has said it will try to clear Mr. Lee's name at trial. It did not immediately comment on his indictment on Tuesday. In the South Korean system, once a suspect is formally arrested, indictment automatically follows, unless evidence emerges that proves the person's innocence. Those cases are extremely rare.

Mr. Lee, 48, a vice chairman of Samsung, has been running the company since his father had a heart attack in 2014. His indictment comes after a challenging period for the company, which issued a global recall of its Galaxy Note 7 smartphones, the most ambitious product launched under his leadership, because they were prone to catching fire.

The elder Mr. Lee was convicted of bribery and tax evasion twice but never spent a day in jail. Each time, he was pardoned by the president and returned to the company. At least six of the nation's top 10 chaebol -- which generate revenue equivalent to more than 80 percent of gross domestic product -- are led by men once convicted of white-collar crimes.

Ms. Park was identified as a criminal accomplice in November, when state prosecutors indicted Ms. Choi on charges of extorting tens of millions of dollars from Samsung and other chaebol by leveraging her connections with the president. But she was protected from indictment while in office.

On Tuesday, the special prosecutor, Park Young-soo, added a bribery charge to the case against Ms. Choi, who is already on trial. He said Ms. Park could also face bribery and extortion charges once she leaves office. Ms. Park denies any wrongdoing, saying the money from Samsung was part of "donations" that businesses provided to two foundations that prosecutors said were controlled by Ms. Choi.

Ms. Park's presidential powers have been suspended since the National Assembly impeached her in December. The Constitutional Court is expected to rule in the coming weeks on whether Ms. Park should be formally ousted or reinstated and allowed to finish her five-year term, which ends next February.

In the current scandal, Samsung was accused of making payments to Ms. Choi in exchange for a crucial vote by the government-controlled National Pension Service to support the 2015 merger of two Samsung affiliates. The special prosecutor says Ms. Park ordered the pension fund to support the merger on Mr. Lee's behalf.

The merger caused a loss of at least $123 million for the national pension fund, which held large stakes in the two affiliates, but it increased the stock value of the Lee family by at least $758 million, the prosecutor said.

The four executives under Mr. Lee who were also indicted belonged to Samsung Electronics or to the conglomerate's powerful, secretive Corporate Strategy Office. Critics say the office worked mainly to tighten the Lee family's imperial control of the conglomerate and enforce the father-to-son transfer of leadership. On Tuesday, Samsung said it was disbanding the office as part of its effort to make its corporate governance more transparent.

[Source: By Choe Sang-Hun, Seoul, Prk, 28Feb17]

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Corruption and Organized Crime
small logoThis document has been published on 02Mar17 by the Equipo Nizkor and Derechos Human Rights. In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.