Samsung chief indicted

By Jae-Soon Chang

Associated Press

SEOUL, South Korea — Special prosecutors said Thursday they indicted Samsung Group Chairman Lee Kun-hee on charges of tax evasion and breach of trust, though cleared the conglomerate of allegations it kept a slush fund used for bribery.

The announcement concludes a three-month probe into a slew of alleged wrongdoing at South Korea’s biggest industrial conglomerate. Lee and close family members have been summoned for hours of questioning during the investigation.

The prosecutors said in a statement that they would not arrest Lee as it would "cause enormous disruptions" in Samsung corporate management. The "negative repercussions on our economy would be very big amid the extremely competitive global economic situation," they said.


The investigation began in January and was spurred by accusations made late last year by former top Samsung attorney Kim Yong-chul. The conglomerate has denied the allegations, including claims that it bribed prosecutors and other officials.

Cho Joon-woong, who led the investigation, told reporters that prosecutors found "no trace" of systemic bribery.

The probe has also examined long-simmering allegations by civic groups that South Korea’s biggest family-run conglomerate has used dubious financial transactions to ensure corporate control passes from Samsung Chairman Lee to his son.

The investigation essentially agreed with that view.

"Samsung Group has a lot of structural problems, such as illicit transfer of management control," the prosecutors’ statement said.

"It is the hope of our investigation team that this probe would serve as an opportunity for Samsung to shed these problems and be reborn as an undisputed ultra first-class global company."

The conglomerate vowed to act on that advice.

"Samsung is preparing reform plans, based on advice from various sectors of our society," Lee Soon-dong, president of Samsung’s strategic planning office, said in a statement. He also said Samsung "would like to apologize for causing concerns."


Prosecutors said that they found 4.5 trillion won ($4.5 billion) of Chairman Lee’s personal assets in bank accounts under borrowed names and that he evaded taxes worth 112.8 billion won ($114 million).

If found guilty Lee could face a sentence of between five years to life in prison, though judges also have leeway to issue a sentence in which no jail time would be done.

Prosecutors said the breach of trust charge resulted from Lee having been briefed by aides about dubious financial transactions, including the sale of bonds convertible to shares to Lee’s children. He was also charged with violating the nation’s stock exchange law.

Samsung Vice Chairman Lee Hak-soo, regarded as Lee’s closest confidante, and two other executives were also indicted on breach of trust charges. In total, 10 Samsung executives were charged.

The 66-year-old Lee, one of South Korea’s richest people and its most influential business executive, was called in twice by investigators for questioning about the allegations.

After the second round last Friday, Lee said that he assumed responsibility for the scandal, adding that he would consider a major revamp at Samsung and hinted at even possibly stepping down as chairman.

Investors have largely shrugged off the allegations and ensuing investigation. Shares in Samsung Electronics, for example, have jumped 25 percent since Kim, the former Samsung lawyer, came forward in early November.

They rose 1.5 percent Thursday to close at 661,000 won ($666).


The scandal, however, has struck a nerve in broader society, where pride in the conglomerate’s success as South Korea’s top business group meets concerns that it has too much power and influence."Of course proper legal process should be followed, but I do not want the foundation of Samsung to be shaken," said Min Tae-sik, a 57-year-old engineer. "I am a little bit nervous, actually."

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