South Korea | Samsung chief escapes arrest, but not fully in the clear yet
Same old song: Samsung Group's Jay Y. Lee leaves a Seoul court hearing. Public outrage at the latest scandal involving the country's chaebol may finally force real reforms... or not. Photo: Reuters
Same old song: Samsung Group's Jay Y. Lee leaves a Seoul court hearing. Public outrage at the latest scandal involving the country's chaebol may finally force real reforms... or not. Photo: Reuters

Samsung chief escapes arrest, but not fully in the clear yet

Judges at Seoul Central District Court said early Thursday morning they were not satisfied there was sufficient reason to approve Lee’s arrest.

January 19, 2017 8:46 AM (UTC+8)

South Korean authorities on Thursday were refused permission to arrest the de facto head of Samsung on suspicion of bribery and embezzlement, denying them their biggest corporate scalp in a massive corruption scandal that has seen the president suspended from power.

While Lee Jay-yong, aka Jay Y. Lee, escaped detention, the investigation will continue, leaving open the possibility of a future indictment.

But it was unclear if the probe could mark a break with an era of tolerating deep-rooted corruption at family-run conglomerates for the sake of the economy. A familiar spectacle in South Korea sees business leaders face prosecution only to receive a slap on the wrist.

Judges at Seoul Central District Court said early Thursday morning they were not satisfied there was sufficient reason to approve Lee’s arrest.

Samsung has denied giving illicit payments to a close confidante of the president to ensure that the national pension fund, a major shareholder, would support a controversial merger of company affiliates in 2015.

Lee, the heir to a family-run business empire that generates a fifth of South Korea’s GDP, is suspected of overseeing payments to foundations controlled by Choi Soon-sil, a close friend of President Park Geun-hye, who has been suspended from office since the legislature voted for her impeachment last month.

Park has been accused of colluding with Choi to shake down large firms for payments, as well as allowing Choi a say in how the government was run, despite her having no official position in the administration. The scandal has led millions to march in the streets, in arguably the biggest political upheaval to hit the country since democratization in the late 1980s.

The Samsung Electronics vice chairman’s detention would have complicated a third-generation leadership succession seen as inevitable since his father, group head Lee Kun-hee, suffered a heart attack that has kept him out of public view since 2014.

Geoffrey Cain, the author of a forthcoming book on Samsung, said there was growing resistance to dynastic control at large firms, and the emergence of good governance laws and foreign shareholders in recent years made succession less inevitable than before.

“They really rose to influence at a time when companies needed these unifying figures, when they needed wealthy family aristocrats who could run things,” Cain said of the second-generation leaders of the family-run conglomerates, or “chaebol.” “But now, South Korea is just such a different country.”

“I mean, could you imagine if Steve Jobs or Elon Musk or any of these guys were arrested for allegedly bribing the president?” he said.

In South Korea, the arrest and prosecution of business leaders is far from unusual. But what is rare is for a chaebol boss to actually serve out a sentence in jail. Lenient judges, citing risks to the economy, have typically given convicted business leaders suspended sentences, while successive presidents have pardoned them of their crimes.

According to a 2012 analysis by chaebol.com, seven bosses among the top 10 chaebol have been sentenced to prison since 1990, but not one has served time.

Lee’s own father was twice convicted of white collar crimes, including embezzlement and tax evasion, only to receive a presidential pardon on each occasion. The justification for his most recent receipt of clemency, in 2009, was so that he could campaign for the country’s bid to host the 2018 Winter Olympics.

“I think that most Koreans are sick and tired of corruption and the ‘money talks’ attitude of chaebol and the people in power,” said Steven Kim, a policy advisor to Transparency International Korea, which ranks the country 37th on its global Corruption Perceptions Index.

Kim said he hoped the investigation of the country’s most powerful firm would mark a turning point in the country’s response to corporate misdeeds.

“I think now the Korean people have realized that without eliminating corruption, Korea’s economic development or growth has reached its limitation,” he said. “So crisis is also opportunity for Korea.”

Cain said South Korea was currently looking at the “best chance there is” to grasp sweeping reform.

“Basically, every single major figure in the political establishment is being affected by this in some way,” he said. “And this goes way beyond what has happened before.”

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