Samsung, Lotte Heads Line Up for Biggest Korean Corruption Probe

  • Nine heads of chaebol business empires face questioning
  • Parliamentary hearing probes linked to President Park scandal

South Korea starts what could be its biggest parliamentary hearing in history this week, as the heads of industrial behemoths Samsung and Hyundai line up with seven other top business leaders to be grilled by lawmakers over President Park Geun-hye’s influence-peddling scandal.

The National Assembly’s special investigation hearing of the leaders of the so-called chaebol conglomerates will air nationwide from Tuesday at 10 a.m. in Seoul, an official at the investigation committee said. Eighteen lawmakers –- nine from the ruling Saenuri party and nine from opposition groups -– will question the billionaires about tens of millions of dollars given to foundations controlled by Park’s friend Choi Soon-sil, the woman at the center of the influence scandal.

Choi Soon Sil, a long-time close friend of South Korea's embattled President Park Geun Hye, appears at the Seoul Central Prosecutors' Office on Oct. 31, 2016, after being summoned for questioning over allegations she played an improper role in important state affairs. Choi was quoted as telling reporters, "Please forgive me. I am sorry. I committed a sin that deserves death." (Photo by Kyodo News via Getty Images)

Choi Soon Sil.

Photographer: Kyodo News via Getty Images

The hearing comes at the end of a tumultuous year for Asia’s fourth-largest economy, which is struggling to maintain economic growth. Samsung’s exploding phones, the collapse of Hanjin Shipping Co. and investigations into the conduct of the head of the Lotte retail group eroded confidence in the nation’s industrial system. Its shipbuilding and steel industries are facing difficulties, and Bank of Korea Governor Lee Ju-yeol has cited record household debt as a risk to financial stability.

“With recent major setbacks in key industries and uncertainties in the U.S., this is a nervous time for the Korean economy and particularly the chaebols as they experience fallout from the Park-Choi scandal,” said Kent Boydston, a research analyst at the Peterson Institute for International Economics in Washington. “No matter how President Park exits the presidency -- and what political deal may be behind it -- the scrutiny on the chaebols will not go away.”

On Saturday, hundreds of thousands of South Korean protesters marched to Park’s office, chanting “step down now -- arrest her!” and “chaebols are accomplices.” Unlike the mass protests in the 1980s that led to the resignation of then-President Chun Doo-hwan, which were met with riot police and tear gas, the recent rallies against Park have drawn people of all ages in festive mood. People sang an altered version of the carol Feliz Navidad and K-pop songs, inserting the line “Park is not my president.”

How the Influence-Peddling Scandal Rocked South Korea: QuickTake Q&A

It’s the first time all the heads of the biggest family-run chaebols, who usually shun talking to the public, have been called together to give evidence to parliament. A key question will be whether they gave donations to Choi’s foundations at the request of President Park, seeking preferential regulations or approvals: In other words, whether they gave bribes.

The biggest tycoon facing questioning will be Jay Y. Lee, vice chairman of Samsung Electronics Co., and the son and probable successor of 74-year-old Group Chairman Lee Kun-hee. In the past weeks, prosecutors raided Samsung’s headquarters and offices of the National Pension Service, South Korea’s largest pension fund and the biggest outside shareholder of Samsung Electronics. 

The NPS has come under fire from civic groups over its support of a controversial merger between Samsung C&T Corp. and Cheil Industries Inc. last year. Besides Lee and the other chaebol leaders, the special investigation committee will summon witnesses who were in charge of the merger.

Officials also searched the headquarters of Lotte Group and SK Group, seeking evidence of whether they donated money to foundations controlled by Choi in return for duty-free business licenses. Embattled Lotte Chairman Shin Dong-bin, 61, and SK Group boss Chey Tae-won, 56, are among those summoned for questioning. None of the nine chaebol groups have been charged with wrongdoing.

A Lotte Group spokesman denied allegations that the company gave money in return for a license. SK Group doesn’t comment on ongoing investigations, a spokesman said. Samsung Group had no comment, while the NPS has said it approved the merger based on a long-term view.

In what could be the first investigation into a sitting President, Prosecutors have said Park colluded in a scheme to pressure the big business to donate money to the foundations, while Choi was indicted of attempted coercion and abuse of authority. Choi’s lawyer denied most of the allegations at a briefing with local media. President Park has apologized to the nation in televised speeches, although she said she had never sought personal interests during her government service.

“Those in political power and the owners of the chaebols can turn into runaway trains when there is no system of checks and balances,” said Park Ju-gun, president of corporate watchdog CEOSCORE.  

The committee hearings open Monday with evidence given by the presidential secretary’s office and the finance ministry, while individuals including Choi’s family and former presidential secretaries will be summoned on Wednesday. Following the hearing, parliament is scheduled to vote on Friday whether to impeach Park.

South Korea’s leaders and business groups have faced accusations of corruption for decades since Park’s father, the dictator Park Chung-hee, fostered the family-run business empires in the 1970s, ushering in the country’s “economic miracle.” In 1988, the National Assembly summoned the late Chung Ju-yung, founder of Hyundai Group, and some other business leaders to give evidence about chaebol donations to the Ilhae Foundation, set up on the request of then-President Chun.

“I gave the money as I was told to do so,” Chung said, according to an official transcript of the hearing. He said he voluntarily gave money to the foundation the first time but had to "follow the current trend” afterwards.

Those summoned to appear Tuesday include Chung’s son Chung Mong-koo, head of Hyundai Motor Group. The other chairmen due to be questioned are LG’s Koo Bon-moo, Hanhwa Group’s Kim Seung-youn, Hanjin’s Cho Yang-ho, Sohn Kyung-shik at CJ Group, and Huh Chang-soo, head of GS Group.

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