hankyoreh

Online news outlet Newstapa has released video clips indicating that Samsung Chairman Lee Kun-hee purchased sex during the years 2011-2013. The videos show a man on a couch who appears to be Lee discussing sex with groups of women.

With the publication of a video that appears to show Samsung Electronics Chairman Lee Kun-hee purchasing sex, the “owner risk” at the Samsung Group is coming back into focus.

Lee was incapacitated by a heart attack in May 2014, but management of the group has not completely passed into the hands of his son, Samsung Electronics Vice Chairman Lee Jae-yong. And now, as accusations surface that the head of the group was involved in prostitution, the image of South Korea’s best-known company is being dragged through the mud.

Executives at the Samsung Group’s Future Strategy Office, which serves to coordinate the group’s activities, came to the office on both Saturday and Sunday to follow developments and discuss options. But they have made no official response other than the one released on Friday, July 22: “We are disturbed by the scandal about Chairman Lee Kun-hee. As this is a matter related to an individual’s private life, the company has no comment.”

Samsung issued an apology to the South Korean public in 2005, after the so-called “X-files scandal” at the Agency for National Security Planning (now called the National Intelligence Service), which involved a leak of tapes recorded by the agency that contained discussions about using cash to lobby politicians and prosecutors.

When a special prosecutor launched an investigation into slush funds described in a bombshell revelation by former Samsung attorney Kim Yong-chul in 2008, Lee had to confess wrongdoing once more and step down from his position as chairman.

In 2005, Lee promised to “eliminate poor practices and outdated traditions and to adopt a proper and transparent management style.” In 2008, he promised to “increase the transparency of management and to put into place proper and ethical management.”

In 2009, Lee was sentenced to three years in prison (suspended for five years) and fined 110 billion won (US$96.73 million), after being convicted on charges of seeking to cede his control of the Samsung Group to his children through irregular means by selling them bonds with warrant (BW) at Samsung SDS at below-market prices.

But this incident shows that the Samsung Group is still not immune from owner risk.

The contract for the apartment in the Nonhyeon neighborhood of Seoul that had served as Lee Kun-hee’s “safe house” was rented under the name of Kim In, former president of Samsung SDS, and the checks that the women received were issued by the Samsung Town branch of Woori Bank. Given these facts, it is difficult to deny allegations that the company was involved in Lee’s private life.

While the Samsung Group claims that “Lee’s private life and company business were strictly distinguished,” the secretaries who kept tabs on Lee’s private life were on Samsung‘s payroll. Kim In himself was one of Lee’s former secretaries and had also served as the president of Samsung SDS, the company that was involved in the dubious scheme to hand over management rights in the group to Lee‘s children.

“There are suspicions that there was a ’imperial guard‘ in the group that was at Lee’s personal disposal. This offers us a glimpse into the imperial style of management and illustrates the need to create an internal control system to monitor the activities of the group head and to check their power,” said Kim Sang-jo, director of Solidarity for Economic Reform and a professor at Hansung University.

The scandal reveals once again the sordid underbelly of South Korea’s chaebols, as the country’s family-run conglomerates are called. It reflects the bizarre behavior of the families that own the chaebols: former M&M President Chey Chul-won, a member of the family that owns the SK group, beat a labor union official with a baseball bat and them gave him “blood money,” while former Korean Air Vice President Cho Hyun-ah forced a taxiing plane to turn around in the “nut rage” incident.

These families also have their fair share of moral problems: a president in the Doosan Group who is in the fourth generation of the family was blackmailed with a sex video, and SK Group Chairman Chey Tae-won confessed marital infidelity.

Lotte Group General Chairman Shin Kyuk-ho funneled work to his third wife, illustrating the problem that chaebols have with distinguishing between work and private life.

“The chaebols have long acted as if they were above the law, and this video falls in the same category of behavior,” said Song Won-geun, a professor of industrial economics at the Gyeongnam National University of Science and Technology.

By Lee Jeong-hun, staff reporter

Please direct questions or comments to [english@hani.co.kr]