Pardon me! What signal does Seoul think freeing Chey Tae-won sends to the wider world?
By Aidan Foster-Carter
The late Margaret Thatcher, Great Britain’s redoubtable first female prime minister, was not renowned for her sense of humor. But she made at least one memorable, if scripted, joke.
In 1980, early in her premiership amid rising unemployment, many urged Thatcher to soften or retreat from her hard-line policies. In a pun on the word U-turn, her famous retort was: “You turn if you want to. The lady’s not for turning.” And so it proved, for ten more years.
The Iron Lady was a divisive figure. Her refusal to listen eventually led to her downfall. Yet even her enemies could not deny that Margaret Thatcher had the courage of her convictions.
Can the same be said of South Korea’s first female leader? Park Geun-hye’s core beliefs are somewhat hard to pin down. In the last few years, first as a candidate and then as President, she has embraced a range of causes – or slogans: economic democracy, creative economy, welfare reform, slashing red tape. Nowadays labor market reform seems to be top of her list.
Pragmatism is a virtue, but so is principle. On one point Park Geun-hye used to be very clear. Back in 2012, campaigning for the Presidency, she declared that “Presidential pardons should not be abused. Particularly, tycoons convicted of corruption should not benefit from this.”
For two years she stuck to her guns. Business leaders found guilty of crimes, who in the past could in effect count on a ‘get out of jail free card’ as in the board game Monopoly, suddenly found that jail meant jail, not a swift parole or pardon. The law was upheld; justice was done.
Then the drumbeat started. Last September both Hwang Kyo-ahn – then South Korea’s justice minister, but promoted this year to be prime minister – and minister of strategy and finance Choi Kyung-hwan, were quoted as saying tycoons should be considered for pardons, since this would help promote job creation and economic recovery. (Job creation? How, exactly?)
In December another political heavyweight chimed in. Kim Moo-sung – chairman of Park’s ruling conservative Saenuri party, and a leading contender for its presidential nomination in 2017 – declared that corporate investment, which has been flagging, needs the owner’s input.
That too was question-begging. Who actually owns the chaebol, Korea’s famous (sometimes infamous) conglomerates? As academic studies and recent events – such as the succession process at Samsung – have shown, a dense and obscure web of circular cross-holdings allows chaebol families to wield and retain control, despite often quite small actual stock ownership.
This year, two recent events might have been expected to scupper any more talk of pardons. Their past abuse was highlighted, among much other dirty linen, by the suicide in April of Sung Woan-jong, a businessman under investigation. He left a little list, naming some big names with sums of money beside each. One was the then new premier Lee Wan-koo. Lee had promised a war on corruption, but in July was was indicted for taking bribes from Sung.
In a career spent sailing close to the wind, Sung had earlier received not one but two special pardons from different Presidents. Yet despite this timely reminder, as August 15 drew near – Liberation Day (from Japanese rule) in Korea, and a special one in this 70th anniversary year – the campaign began again. Briefed from on high, Seoul’s media dutifully speculated that despite Park’s past pledges, this time the list of pardons would include some business leaders.
Then came the Lotte debacle. Hitherto respected as a leading name in Asian retail and leisure, in July the fifth largest chaebol shocked the world with an outbreak of fratricidal strife. Two brothers from the Japanese-Korean Shin family fought fiercely and very publicly for control.
In case anyone had forgotten why chaebol governance is a chronic burning issue – hard to imagine, since we had also had Heather Cho and the whole ‘nut rage’ Korean Air soap opera to entertain and appal – the Lotte imbroglio (not over yet) was a salutary reminder. The local press changed its tune. With the antics at Lotte, surely no tycoons would be set free now?
And indeed most were not. Maybe the Lotte and Sung scandals did stave off a wider amnesty. The 6,527 persons whom President Park pardoned on August 13 included no politicians, and only one businessman out of several tycoons currently behind bars. But what a businessman.
Chey Tae-won, chairman of SK Group, is a free man once more, having served less than two-thirds of his four-year prison term for embezzlement and corporate malpractice.
SK (formerly Sunkyong) is the third largest chaebol. While not a global brand like Samsung or Hyundai, it is huge and in typical chaebol fashion has fat fingers in many pies: telecoms, chip-making, petrochemicals and more. So, what kind of man does SK have at the helm?
Sad to say, a repeat offender.The crime for which – or despite which – Chey Tae-won has just been freed was not his first. Back in 2003 he was sentenced to three years for his part in a $1.2 billion accounting fraud, only to be freed after just three months. (Those were the days.)
Some readers may recall the titanic struggle which followed. Sovereign Asset Management, a foreign fund and major investor in SK Corp, campaigned to unseat Chey as unfit to serve due to his criminal record. Chey fought back by playing the nationalist card. That worked, as it usually does in Seoul. In 2005 Sovereign cashed out and walked away, $700 million richer.
Lessons were learned, it was said. Prof. Jang Ha-sung, a noted shareholder activist and often a scourge of the chaebol, said the pressure had much improved governance at SK. In 2010 then-President Lee Myung-bak chose Chey Tae-won as the public face of Korean business to the world: he chaired a global business leaders’ meeting held alongside the G20 summit in Seoul.
Yet that pesky interfering foreign fund turned out to have been right after all. In 2012 Chey Tae-won was indicted, and later jailed, for stealing $45 million from SK to invest riskily and unsuccessfully in futures and options. With a personal fortune according to Forbes of $2.8 billion, if he wanted a punt why not use his own money? Or did he see SK’s funds and his own as interchangeable? To adapt Louis XIV, he may well have thought: “L’enterprise, c’est moi.”
Despite assurances that the now twice-convicted Chey would sever his links with SK, he did no such thing. His first 17 months in jail saw 1,778 visitors, while his 2013 remuneration of 30 billion won was South Korea’s fattest pay packet. After that he made as if to resign, but no one was fooled. Why call for his release if he is not in charge of, and supposedly vital to, SK?
Indeed, why pardon him? The reasons given are feeble, especially Park’s bizarre suggestion that pardons would “boost people’s spirits.” One mocking headline read: “South Korea seeks to lift national spirits by pardoning convicted fraudsters.” Indeed, where is the logic in that?
The President also said that she wants to “forge national reconciliation”. But how should law-abiding citizens, who manage not to defraud the public or rob their own companies, feel now? Or the judges, who duly tried and properly convicted Chey for serious financial crimes?
As for revitalising the economy: Exactly what special, indispensable skills does a man have who is caught first falsifying accounts, then stealing from the firms he was entrusted to run? In other OECD member states, one of these offences – let alone both – would disbar a convict from ever controlling a company (let alone the same one) again. Why is Korea different?
South Koreans are prone to worry about how their country is perceived. Their government too is keen to promote Korea as a brand. Did that somehow slip their mind? Pardoning Chey Tae-won will hardly burnish Korea’s image. Nor is the damage just reputational. Events such as this ensure that the notorious ‘Korea discount’ will continue to drag down corporate value.
Those rather simplistic cultural guides for westerners often stress how important shame and ‘face’ are in Korea, and elsewhere in east Asia. Really? Chey Tae-won appears to have no shame. And in pardoning him to go on running the third largest chaebol, neither does Korea.
Yes, Chey apologised. He could hardly not. But as with Shinzo Abe, given his past form how can we rate his sincerity? Clearly he has no conception that the decent course would be to step down. SK and its shareholders can only hope he is a reformed character. Third time lucky?
As for Park Geun-hye, time is running out. South Korean Presidents serve only a single five-year term, and she reaches the halfway mark on August 25 as a less than iron lady. No doubt she came under huge pressure to pardon Chey Tae-won: not from the public, but in Cabinet and from the Federation of Korean Industries (FKI).
Yet she would have done her country, and her own reputation, greater and lasting service if she had found the steel to resist and stand up for principle. Alas, the lady was for turning.
Aidan Foster-Carter is honorary senior research fellow in Sociology and Modern Korea at Leeds University, UK, and a freelance writer, consultant and broadcaster on both Koreas.
(Copyright 2015 Aidan Foster-Carter)