Lee’s arrest may turn up heat on Park

And lastly it came. Samsung’s Group de facto leader Jay Y Lee was formally arrested over his alleged involvement in massive corruption scandal. It is believed that Lee, scion of the South Korea’s richest family and vice chairman of Samsung’s Electronics, gave bribes worth $36 million to President Park Geun-hye and her close friend, Choi Soon-sil, to help win government support for a smooth company leadership transition.
Samsung’s name cropped up during an investigation into contributions that dozens of Korean companies gave to Choi Soon-sil, a confidante of Park. Samsung was the biggest donor among dozens of $70 million to two nonprofit foundations controlled by Choi. The electronics giant also transferred millions of euros to Choi’s company in Germany that bankrolled equestrian training of her daughter and funded money to a winter sports center operated by her niece.
The scandal has rocked South Korea with millions of people taking to the streets in protest. President Park was impeached and her powers suspended. A separate constitutional court is examining the case to determine whether Park would be ultimately removed from office.
In the absence of his ailing father, Lee became a new face of Samsung. But the corruption allegations may mean the damage to Lee’s reputation is irreversible. New evidence showing South Korean President Park Geun hye’s broader involvement in Samsung’s family succession plan led to the arrest of Lee. Initially, prosecutors focused on their argument that Samsung offered bribes and in return, the government backed a controversial merger of two Samsung companies in 2015. But prosecutors also found evidence of Lee concealing profit gained through criminal acts and hiding assets overseas.
Younger Lee is not the only in his family to face the criminal charges. His father, Lee Kun-hee, was also convicted in 2008 and 2009 for embezzlement and tax evasion related to business dealings.
The Seoul Central District Court took decision thinking that Lee might destroy evidence or flee the country. Now the entire process will take long as 18 months for a trial and verdict. The stock market reacted negatively to the development. The shares of Samsung fell less than 1 percent in Seoul. It could have more impact on the stock.
Samsung Group has said that it will do its best to ensure that the truth is revealed. The company has denied it paid any bribe to the president in exchange for favours. The arrest has shocked the business community. But the critics of the chaebol, the South Korean family-controlled business conglomerates that dominate the economy, are happy. The arrest of Lee would provide a momentum for fundamental changes to end the collusion between the government and businesses. It is also seen as an opportunity to change a business community long criticized for poor corporate governance and a lack of transparency.
The Samsung’s scion arrest is also seen as a test of the country’s judicial system. In the past, the judiciary was accused of showing leniency towards the powerful business elite families. With this court decision, the prosecution team may bring bribery charges against President Park Geun-hye too.
Lee’s arrest may hamper Samsung’s businesses and country’s economy. But there is another version too. People think that the development will not hurt Samsung as the world’s largest maker of smartphones has three separate CEOs each overseeing its electronic component, mobile phone and television divisions. However, major management decisions or succession planning is likely to be delayed.