Corruption Scandal: Prosecutor Seeks Arrest Warrant for Arrest of Samsung Vice Chairman

Samsung heir attends key group event
Being the world’s 35th most powerful man and the most powerful man in South Korea obviously has a price. You are under the microscope all the time. Everyone is taking a look at each and every step you take and listening to every word you say, just waiting for you to slip up, to spill some dirty laundry. So it is always good to have some powerful friends in these situations right? Just to keep the prying eyes and “flies on the wall”, at bay. But you’re bound to come under the spotlight sooner or later and well that’s exactly what happened.  But let’s start from the top. It all started when Lee Jae-yong was selected as the Vice President of Strategic Planning at Samsung.

Of course it isn’t too difficult to reach a position like that when your grandfather is the founder of the company and your father is the chairman. And when you have privileges like this, you usually are given special treatments like making a position at one of the leading electrical companies just for you. So time went on and not Mr. Lee is considered the heir to one of the leaders in global electronics and various other services like IT solutions provider, Samsung. Who hasn’t owned a Samsung phone? We all know the worth of their products and the sales figure they have been hitting since entering the world of mobile technology. Samsung is one of the leading product designers and producers. It’s practically a household name all over the world.

So, president Park Geun Bhye comes in to power as South Korea’s president, and then the whole scandal with Choi Soon Sil hit, which led to a lot of demonstration in South Korea demanding the president step down. The demonstrations went on for some days, and eventually Park stepped down. Now, the authorities had the open hand to catch all the people that had been under Park’s protection or had any kind of business links with him. One of these individuals was Lee. Allegedly, the authorities considered the Samsung heir to have paid up to $36 million in bribes to the president and other members of the government officials list.

Technically, they alleged that bribes were made by the company as donations to not for profit organizations run by Choi Soon sil, who, as we just mentioned was the partner in crime for the president. So well, it might be nothing but donations by a well reputed company that has been known to give large amount to donations any way. But the accusation was then targeted towards the Samsung Vice chairman rather than the company as a whole. The main cause of concern was the planned merger of Samsung C&T, the Construction Company, and Cheil industries. So allegedly, Mr. Lee agreed to pay 3.1 million USD to the company that was co-owned by none other than Ms Choi’s daughter and herself.

In return the deal for Samsung C&T was to be completed smoothly. Initially, Mr. Lee as expected denied any of these charges and even provided evidence to the politicians. But then he was questioned by the authorities for 22 hours. And after that he did agree to have paid just south of 20.4 Billion won or 17.6 million USD to the not for profit foundations, not only that, he also admitted to gifting them a horse and some money to Chung Yoo Ra, the daughter of Ms. Choi’s for her equestrian career. Mr. Park says that he deeply regrets gifting them anything and maintains that he never asked for anything in return for his charitable donations.

On January 15th the Seoul Court received a request for the warrants of arrest of Mr. Lee. In order to question him further about the alleged bribery. This request was rejected by the court on January 18th after much thought given to it. Court ruled that Mr. Lee was not a flight risk, and isn’t even allowed to leave the country. So that leaves him being stuck in his home country. However, Mr. Lee did face some difficulty when he had to wait for the decision, in the detention center but was released as soon as the decision was announced. The problem here was that if Mr. Lee was arrested, this would’ve left a large power, and leadership gap in the organization because Samsung Group is a “Chaebol”. Chaebol essentially means large business empires owned by families. Because Mr. Lee Kun-Hee, Park Lee’s father and the chairman of Samsung was left bed ridden after he suffered a heart attack in May 2014.

Samsung had already been putting in some thought and were working on plans to officially formalize the successions of the conglomerate. But right now they are probably glad that no official steps had been taken, because the gap that would be left in case Mr. Lee was detained or arrested might would’ve caused serious concern in Samsung as well as hit its share price much more than it had already been hit when the request for his warrants came out and also when he was detained for 22 hours. However the share price did recover gradually but well enough. Since then, the Samsung headquarters have been searched multiple times by the officials. Also some of the top executives were questioned as well.

On January 21st, it’s being reported that the current statement by Mr. Lee states that he was “coerced by the president” to donate funds to companies linked with the President Park’s partner in crime Ms. Choi. Even the prosecutors are aware that the implications with arresting one of the largest business and technological entities in the whole world might be huge. And they are conduction their research as to how it will impact the country’s economy and what steps can be taken to avoid a large loss. As to what will happen with Samsung in the future and whether it will weather the storm or crumble under it, is something that only time will tell. For now, let’s just keep our focus on the inevitable launch of Galaxy S8.