Samsung chairman implicated in slush fund scandal

Posted on : 2007-11-03 11:36 KST Modified on : 2007-11-03 11:36 KST
Lee Kun-hee directly managed affiliates and suggested that company officials adjust ad contracts against The Hankyoreh

Samsung Chairman Lee Kun-hee, chairman of Samsung Group, was found to be directly involved in the company’s practice of regularly giving bribes to politicians and prosecutors, following allegations against the nation’s largest conglomerate that emerged earlier in the week.

The group’s internal documents, recently obtained by The Hankyoreh, show that Lee had also directed officials to consider cutting back on ads by media outlets that were critical of the conglomerate, or chaebol, and to devise a way to provide indirect support to civic organizations critical of Samsung.

According to documents obtained by The Hankyoreh on November 2, Chairman Lee, speaking on December 12, 2003 at Phoenix Park, a resort complex owned by Lee’s brother-in-law in Pyeongchang, Gangwon Province, said, “It is unreasonable to give cash to people working in finance and the government and lawyers, prosecutors and judges. However, hotel discount coupons will be fine for them.”

Since then, Samsung affiliates have purchased vouchers from the Shilla Hotel and given them to people outside of the company who are on the list of people to be “managed” by the group.

The documents, which contain instructions from Lee to top executives made at official meetings or his residence, were prepared by Samsung’s corporate restructuring office (now called the strategic planning office).

“After pasting articles from The Hankyoreh that give a negative impression of Samsung into a scrapbook, show it to them and have them to compare what they see with other newspapers,” Lee said on October 18, 2003, in Tokyo. Lee then ordered Samsung to consider adjusting their ad contracts against The Hankyoreh, according to the documents.

Lee also suggested that the conglomerate give indirect support to civic organizations critical of Samsung Group. “Let’s consider donating several billions of won to non-governmental organizations like the People’s Solidarity for Participatory Democracy, but such donations should not go to projects that could hurt us,” Lee said on October 22, 2003, in Tokyo.

The documents also showed that Lee was directly involved in the management of group affiliates, despite Samsung’s repeated assertions to the contrary. “Consider selling Bundang Plaza or operating it under another management,” Lee said on Sept. 5, 2003, in his home in Hannam-dong, Seoul. Samsung Corp.’s Bundang Plaza was sold to Aekyung last year.

In response to the documents, a senior executive at Samsung Group’s strategy planning division said, “At this stage, I have never seen the documents and don’t know where they were released.” He added, “We are now in the process of confirming whether the documents are true or false,”

The allegations against Samsung were first brought to light earlier this week when Kim Yong-cheol, who was once the director of a legal department attached to the secretarial office of the group’s chairman, stated that in addition to having given cash bribes to over 1,000 of its top tier executives in amounts of 5-10 million won (US$5,500-11,000) according to their positions, Samsung had also given hotel vouchers or gift certificates when cash was not acceptable.

Kim’s statements against the company, which were released by the civic organization Catholic Priests’ Association for Justice, also included the allegation that the conglomerate was keeping an account in the amount of 5 billion won (US$5.5 million) under his name without his knowledge. Kim also revealed that some 40 prosecutors had been bribed by the conglomerate, along with government officials and members of the press.

Samsung has denied the allegations and says that the account held under Kim’s name is now being managed by the third party, after Kim handed it over to a fellow colleague and someone outside of the company.

According to Kim, Samsung pays approximately 1 billion won (US$1.1 million) per year to manage slush funds such as these.


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