hankyoreh

Members of MINBYUN-Lawyers for a Democratic Society hold an event opposing the merger between Samsung C&T and Cheil Industries

A member of the Voting Issues Expert Subcommittee at South Korea’s National Pension Service said that the Blue House and the Minister of Health and Welfare tried to persuade him to vote in favor of the merger of Samsung C&T and Cheil Industries last year.

Following the revelation that the Samsung Group donated 23.9 billion won (US$20.37 million) to the Mir Foundation and other organizations associated with Choi Sun-sil, the fact that the Blue House used its influence to help Samsung in its biggest challenge last year is likely to emerge as a key link in the investigation into bribery allegations involving President Park Geun-hye.

The Hankyoreh met with the member of the pension fund’s decision-making advisory board on Nov. 15. “I received a phone call from then Minister of Health and Welfare [Moon Hyung-pyo] asking me to vote in favor [of the merger]. I also got a call from someone I knew asking me to vote for it because that was what the Blue House wanted,” the subcommittee member said.

“My friend told me that the Blue House’s position was that I should vote in favor of the merger. If the merger was rejected, he said, the transfer of power at the Samsung Group would run into trouble, which might damage a company that is so important to the Korean economy. A few days later, I got another phone call to the same effect, again representing the Blue House’s position,” the subcommittee member said.

“I understood ‘the Blue House’ to mean Ahn Jong-beom, who was the Senior Secretary for Economic Affairs at the time,” the subcommittee member added.

Last year‘s merger between Cheil Industries and Samsung C&T occurred at a ratio of 1 to 0.35. This ratio was accused of favoring Cheil Industries, in which Samsung Electronics Vice Chairman Lee Jae-yong and other members of the Lee family hold a 42.19% share.

The merger, which created a de facto holding company for the Samsung Group, was extremely important for Samsung. A stable transfer of management control over the group is only possible if Lee Jae-yong and other members of the family hold a large amount of stock.

The group’s plan ran into an obstacle when Elliott Management, an American hedge fund, aggressively opposed the merger, but Samsung C&T managed to pass the motion in a general meeting of stockholders on July 17 of the same year. The support of South Korea’s national pension fund (11.02%) was a decisive factor in gaining 69.5% support for the motion, which was just 2.8 percentage points above the two-thirds (66.7%) of the voting shares in attendance required to pass the motion.

At the time, the national pension fund supported the measure against the advice of a consulting firm it had hired. While the pension fund’s operating department has typically handed controversial issues over to its decision-making advisory board, it had its investment committee handle the decision about the merger.

“The fund appears to have reached its decision independently instead of sending the issue to the decision-making advisory board, which was likely to oppose the merger,” the board member said.

“If they had handed over the issue to the advisory board, opponents to the merger would probably have had the upper hand,” said Kang Jeong-min, a former analyst for Solidarity for Economic Reform who left the advisory board in protest of this behavior.

There is also evidence that Samsung was working on its own to lobby for the merger. “The president of Samsung’s Future Strategy Office met me and explained in detail the necessity of the merger,” the subcommittee member said.

“I got several calls from people I know urging me to support the merger. I got the feeling that they were calling on Samsung’s behalf,” said another member of the pension fund’s expert subcommittee.

The pension fund’s suspicious behavior has come back into focus because of the scandal about Choi Sun-sil. People’s Solidarity for Participatory Democracy and other civic groups have lodged a complaint with the authorities against Hong Wan-seon, former head of the pension fund’s operations department, for breach of trust. They accuse Hong of having caused 600 billion won in damages by approving the merger, even though it was calculated at an unfair ratio.

Following the revelation that Samsung wired 2.8 million euros to a company personally owned by Choi on top of donating a large sum to the Mir and K-Sports Foundations, which Choi effectively created, attention is focusing on the connection between Samsung and Choi. One week after the merger was passed, Lee Jae-yong met Park Geun-hye at the Blue House; the next month, Samsung Electronics began wiring money to Widec Sports, a German company owned by Choi. The prosecutors are focusing their investigation on the possibility that the seven chaebol chairmen whom Park met personally around this time were given favors in exchange for donating to the Mir Foundation.

In Mar. 2015, Samsung Electronics President Park Sang-jin became chairman of the Korea Equestrian Foundation, which is suspected of having been designed to make it easier for Samsung to provide financial assistance to Jung Yu-ra, Choi’s daughter. “Seeing the latest developments [about Choi Sun-sil], I started suspecting that the government had acted in that way because it had been paid to do so,” the member said.

Amid deepening suspicions that the Blue House’s actions were made to compensate Samsung for the assistance it was giving to Choi, Park is finding herself in an even more dangerous position. If it can be proved that there was quid pro quo, it will be even harder for Park to avoid being charged for bribery.

“The prosecutors will need to definitely establish whether Choi Sun-sil was exerting influence on the Blue House and the Minister of Health and Welfare,” said Chae Yi-bai, a lawmaker with the People’s Party.

“Perhaps I did express my views [with the member of the pension fund’s expert subcommittee], but I don’t remember doing so,” Moon Hyung-pyo told the Hankyoreh over the phone when asked about this issue. Moon was the Minister of Health and Welfare at the time; he is currently the director of the board of the National Pension Service.

“We didn’t send that money because we wanted something in return but because we were being blackmailed by Choi and her associates. The donation we made to the Mir Foundation was nothing more than the sort of quasi-tax that we have often paid in the past,” said a source at Samsung.

By Lee Jeong-hun and Lee Chang-gon, staff reporters, and Kwack Jung-soo, business correspondent

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