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Samsung heir indicted in South Korean corruption scandal

February 28, 2017

Lee Jae-yong stands accused of paying close to $40 million in bribes to a presidential confidante. Prosecutors also accuse the head of South Korea's largest company of hiding assets overseas and committing perjury.

Südkorea Lee Jae-yong, Samsung Electronics
Image: picture-alliance/Photoshot

Special prosecutors announced on Tuesday that they would charge Lee Jae-yong and four other Samsung executives with bribery, embezzlement and other offenses linked to a corruption scandal that has shaken South Korea, leading to an impeachment process against President Park Geun-hye.

Lee is accused of "donating" 43 million won ($37.3 million; 35.2 million euros) to nonprofit foundations run by Choi Soon-sil, a close confidante of the president,  in return for favors from the Park administration, including the approval of a controversial merger between two Samsung sub-divisions in 2015. Prosecutors also believe that Lee hid assets overseas, committed perjury and concealed proceeds from criminal activities.

If convicted, he could face up to 20 years in prison.

Südkorea Prozess Choi Soon-sil
Organizations run by Choi Soon-sil allegedly received close to $37.3 million from the Samsung heirImage: picture-alliance/AP Photo

The 48-year-old Samsung heir has denied any wrongdoing.

On Monday, South Korea's acting president, Hwang Kyo-ahn, denied an extension for the special investigation into the Park corruption scandal, forcing the prosecutor's office to decide whether to indict Lee and other Samsung executives by Tuesday. Investigators have not yet been able to interview President Park.

Samsung stands to take a severe hit from Lee Jae-yong's arrest and indictment. Though Lee is technically only the vice-chairman of the company, he has been considered its de-facto head since his father suffered a heart attack in 2014.

Powerful family-controlled conglomerates

In a brief email sent out shortly after the prosecutors' announcement on Tuesday, Samsung said that three of the five men who had been indicted had resigned. Lee Jae-yong was not named, implying that he will stay on as de-facto chairman during the upcoming trial.

The company also promised an internal restructuring. It said that it would dismantle its central coordinating body, allowing each company unit to run more independently, lessening the focal lobbying power of the cooperation. 

Südkorea Protest gegen Präsidentin Park Geun Hye & Forderung nach Rücktritt
Anti-corruption protests had erupted in South Korea following the revelation that a confidant of President Park had allegedly received millions in bribesImage: Reuters/K. Hong-Ji

Anti-corruption watchdogs were skeptical of Samsung's intentions. "It is yet to be seen whether this is another cosmetic measure aimed to divert public criticism," Chung Sun-Sup, the head of chaebul.com, an online forum dedicated to the operations of Korean conglomerates, told reporters. In an interview with news agency AFP, Chung had previously accused Samsung of dissolving "group-controlling organizations when it got caught in breach of laws, only to revive them afterwards under different names."

When the Park scandal first hit Samsung, the company had promised that it would disband its secretive Corporate Strategy Office, a panel of close Lee family aides who worked to help ensure the father to son leadership transition. The office allegedly orchestrated the bribe for Choi Soon-sil to secure the 2015 merger, a crucial step in strengthening the younger Lee's grip on Samsung.

The tech-giant is the largest of several powerful family-controlled conglomerates known as "chaebol" that dominate the South Korean economy. Corruption charges have dogged many of these businesses, including Samsung under the elder Lee's reign. In 2008, his father,Lee Kun-hee, was convicted for tax evasion and a breach of trust. A former president later pardoned the 75-year-old. 

mb/kms (AP, AFP, Reuters)