Independent counsel under fire for accepting Samsung chairman’s testimony

Posted on : 2008-04-07 12:41 KST Modified on : 2019-10-19 20:29 KST
Remaining evidence of slush fund irregularities and statements by Samsung officials could go unexamined
 the chairman of Samsung Group
the chairman of Samsung Group

There is a new controversy brewing around allegations of corruption at Samsung Group. The independent counsel charged with investigating the allegations has been accused of trying to complete the probe by accepting without question the testimony of the Samsung chairman, who said during questioning last week that trillions of won suspected to have been accumulated via slush funds were his own personal assets. Among other claims raised by its former chief attorney last fall, Samsung has been accused of allegedly raising a massive amount of slush funds by manipulating the account books of its affiliates and bribing high-level officials.

It is believed that the independent counsel, Cho Joon-woong, who questioned Samsung Chairman Lee Kun-hee on April 4, has accepted the chairman’s explanation that money suspected to have been part of the slush fund was actually inherited from his father, the late Samsung founder Lee Byung-chul.

So far, the special investigative team has found some 1,300 borrowed-name accounts at Samsung Securities, which Kim Yong-cheol, the former Samsung chief attorney, said were used to hold the slush funds. The investigation is focused on how the money in the illegal bank or stock accounts was raised. If the money were to be confirmed as slush funds raised by Samsung affiliates, the chairman would be charged with embezzlement and punished accordingly. The chairman’s wife, Hong Ra-hee, has also been accused of using part of the money to buy expensive paintings and other art pieces.

On April 6, it looked like the special investigative team was ready to wrap up its investigation without conducting a further investigation into the borrowed-name accounts and the origin of the money, even though the former Samsung attorney Kim has made several statements to back up his claims.

Kim said he told the special investigative team that Park Jae-jung, a former Samsung executive who was in charge of managing the Samsung chairman’s assets, had ordered Samsung Engineering to raise 5 billion won (US$5.1 million) between 2002 and 2003. Park passed away in 2005. “At that time, there was a war of words between Park and Kim Neung-soo, the director of Samsung Engineering’s management support division, after Kim said ‘It’s unfair for us to create slush funds despite annual losses,’” according to the statement made by the former Samsung attorney Kim.

Another statement given by the former Samsung attorney said that Samsung Techwin had created slush funds by “manipulating its accounts using department store receipts for female clothing that had nothing to do with Techwin’s business.” Samsung Techwin is a maker of airplane parts and digital cameras. The former Samsung attorney cited Hwang Baek, 55, who once served as an executive vice president of Samsung Techwin, as someone who played a leading role in raising the slush funds. Hwang is now the vice president of Cheil Industries, the group’s clothing and textile manufacturer. However, the special investigative team did not conduct a raid on either of the two Samsung affiliates, and instead summoned Hwang for questioning. After Hwang denied the allegation of his involvement, saying, “I didn’t create slush funds,” the independent counsel did not expand his investigation into the matter.

In carrying out its investigation, the special investigative team has also neglected publicly-submitted tangible evidence. In a press conference, the former Samsung attorney Kim revealed a 1994 agreement signed by overseas affiliates of Samsung SDI and Samsung Corp., which showed they had raised slush funds by inflating purchasing costs. However, the special prosecutors have not fully examined the allegation.

Kim Yeong-hee, the deputy chief of Solidarity for Economic Reform, a civic group, said, “An investigation should be conducted to look into the allegation because there was the possibility that slush funds were raised after similar deals were signed.”

Last year, former presidential legal advisor Lee Yong-cheol, 48, publicly confessed that he had received 5 million won from Samsung as a bribe. As the bundle of money had been issued by a branch of Seoul Bank located in Bundang that is close to the Samsung Corp. headquarters, the possibility was high that the money could have been part of slush funds held by Samsung Corp. The special investigative team did not, however, summon the former presidential legal advisor for questioning.

Attention is now focused on what the independent counsel will choose to do about statements made by some officials of Samsung affiliates, including Samsung Life Insurance, who said that they had frequently delivered bags of cash withdrawn from the slush funds, to the group’s strategic planning division, the center of Samsung’s management structure and the Samsung chairman’s de facto secretarial office.

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