April 20, 2024

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[THE INVESTOR] The special counsel team looking into the widening corruption scandal surrounding President Park Geun-hye and her confidante Choi Soon-sil requested the court to issue an arrest warrant for Samsung Electronics Vice Chairman Lee Jae-yong for bribery charges on Jan. 16.

The Samsung heir has been accused of having ordered the top brass of the conglomerate to fund Choi’s businesses and her daughter Chung Yu-ra’s equestrian training in return for business and political favors.

As part of a consulting contract signed in 2015 with Core Sports, a bogus organization run by Choi, Samsung donated 8 billion won (US$6.80 million). It also contributed 20.4 billion won in total to the Mir and K-Sports foundations, which had been set up by Choi and offered 1.6 billion won to a youth sports club run by her niece Chang Si-ho.

President Park’s longtime crony allegedly exerted her influence over government bodies and organizations, including the National Pension Service, one of the largest stakeholders of Samsung affiliates, to vote in favor of a landmark merger between Samsung C&T and Cheil Industries in July 2015.

The merger plan had faced strong opposition from some investors such as Elliott Management due to an “unfair” stock swap ratio which the opponents had said would damage shareholder value of C&T.

The investigation team has already arrested former Health Minister Moon Hyung-pyo over his role in forcing the NPS to vote in favor of the merger.

On Jan. 12, the Samsung vice chairman was grilled by special investigators for 22 hours over bribery allegations.

He reportedly said President Park had urged the conglomerate to make donations to the businesses and organizations run by Choi during the interrogation. His confession differs from his claim during a parliamentary hearing in December that he had merely discussed management and business investment plans with Park in a private meeting.

On the request of the special investigators, a parliamentary committee reported Lee for giving false testimonies during the hearing.

If the Korean court approves the investigators’ request to arrest Lee, a leadership vacuum and damage to the firm’s image after the Galaxy Note 7 crisis will likely be inevitable, according to market watchers.

By Kim Young-won (wone0102@heraldcorp.com)