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The Samsung story – dial C for corruption

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South-Korean business has always been connected to some degree with corruption, but the latest scandal in the country is the most impressive yet. Claiming both the country’s president and the de facto head of Samsung, one of the world’s largest tech companies, this story of corruption is wide-reaching to say the least.

Choi was accused of accepting bribes for the president…

In 2016, Choi Soon-sil, advisor to South Korea’s first female president Park Geun-hye, allegedly used her connections to pressure companies into giving millions of dollars to two non-profit foundations. Unsurprisingly, Choi controlled both foundations and in return was offering them preferential treatment from the government.

It was also claimed that Choi used her position to influence officials at a university to admit her daughter, as well as giving her daughter grades for exams she never sat.

In June this year, the courts jailed her for three years…

Not enough? On top of that, Choi was accused of accepting bribes for the president, with charges of abuse of authority, coercion, attempted coercion and attempted fraud all levied against her.

In June this year, the courts jailed her for three years. Justice served?

Not quite – don’t forget Park.

Claims have surface which suggest Park personally directed Choi to pursue the cash-for-influence angle, and that she also provided her aide with unacceptable levels of access to official documents, concealing it and attacking those who raised suspicions. Parliament took it very seriously, voting to impeach her in December 2016 – a decision upheld by the Constitutional Court this March.

It is alleged that Lee [Samsung’s vice chairman] was giving donations worth 41 billion won (roughly £29 million) in order to win government support…

So where does Samsung fit into this? Lee Jae-yong, the company’s vice chairman and de facto leader, has just been sentenced to five years in prison for corruption after it was believed that Samsung was one of the companies seeking influence.

It is alleged that Lee was giving donations worth 41 billion won (roughly £29 million) in order to win government support for a restructuring of the company that would strengthen his control.

The trial also saw two other Samsung executives convicted and sentenced to four years in prison, causing Samsung shares to fall by 1% overall.

The Samsung Group, comprised of about 60 interlinked companies, has sales equivalent to about a fifth of national GDP…

Internally, it has cast doubt of the future leadership of the company, and raised some questions about the impact on the local economy – the Samsung Group, comprised of about 60 interlinked companies, has sales equivalent to about a fifth of national GDP.

In an untraditional move, it seems a presidential pardon is not on the cards for Lee. The past four South Korean presidents have pardoned scores of executives and businessmen convicted of similar charges, justified publicly as efforts to spur the country’s economy (of which the chaebols, huge family-run businesses like Hyundai and LG, are an integral part).

The past four South Korean presidents have pardoned scores of executives and businessmen convicted of similar charges…

But the nation’s new president, Moon Jae-in, has indicated that the conviction and the sentence were more severe than other recent scandals and is unlikely to break the golden rule and go against the public disposition.

Lee’s lawyers are appealing the sentence but, regardless of the outcome, these events have marked a shift in South Korea’s mood.

It is now widely acknowledged that the chaebols need to change the way that they do business (especially if Lee’s sentence is upheld – it would be a huge departure from what the company has seen in the past), and it has marked a sizeable amount of discontent against the government and the political elite in the country.

With ex-President Park still awaiting her trial, don’t expect that fury to disappear any time soon.

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