Looking for answers after the deaths of scores of children and pregnant women from a mysterious lung ailment, a group of families in South Korea began to focus on a potential cause: a cleaner called Oxy.
In 2011, South Korean officials suggested that toxic chemicals in Oxy, used to sanitize humidifiers and sold by British consumer-goods maker Reckitt Benckiser, and similar products were responsible for the deaths — 95 have been confirmed by the government, which is also reviewing hundreds of additional cases reported by families, who claim more than 460 fatalities. The government’s punishment for Reckitt Benckiser: A US$45,000 fine for falsely advertising Oxy as safe for humans.
Five years later, simmering anger over the deaths has hit Reckitt Benckiser — and prompted widening hostility to white-collar crime that is directed at foreign and local companies alike.
South Korean prosecutors last month arrested three local Reckitt Benckiser employees and charged them with professional negligence resulting in deaths. When a Reckitt Benckiser executive publicly apologized last month, a relative of a victim jumped onstage and slapped him in the back of the neck.
South Korean prosecutors are also considering bringing criminal charges against local Volkswagen executives stemming from investigations into the automaker’s cheating in emissions tests, while lawmakers have significantly raised fines for violating emissions rules. Officials this month raided the homes and offices of top executives of Lotte, a major South Korean conglomerate, to collect evidence of alleged embezzlement. Lotte has said it is cooperating.
To outsiders, South Korea’s rash of criminal investigations and prosecutions against corporate officials make it look unusually aggressive in pursuing white-collar crime. However, South Korean analysts and critics said the tough actions show the opposite: Government officials have little power to brandish big fines or other civil penalties, as their counterparts in the US and Europe do.
“When people are outraged, the government has few things to show to them except asking prosecutors to get involved,” said Kim Pil-soo, a professor of automotive engineering at Daelim University College, who has followed the Volkswagen scandal.
For corporate scofflaws, South Korea can be a surprisingly forgiving environment. Fines are modest. Until recently, courts routinely suspended the sentences of tycoons convicted of bribery, embezzlement or tax evasion, citing the potential impact on their corporate empires — and, by extension, the country’s economy. Class-action lawsuits and court awards are limited.
The soft treatment is a legacy of South Korea’s hard-charging economic past. In the decades after the 1953 Korean War armistice, military dictators in South Korea favored businesses — especially a handful of corporate families known as chaebol — with tax benefits, cheap electricity and bank loans, and brutal crackdowns on labor activists.
However, there are signs that South Koreans’ patience is running thin. In a study a year ago commissioned by the government’s Korea Legislation Research Institute, more than half of about 3,000 people queried said they did not believe South Korean businesses abided by the laws, while more than two-thirds said business regulations against pollution should be strengthened.
In the newly elected National Assembly, where South Korean President Park Geun-hye’s pro-business governing party no longer holds a majority, lawmakers are pushing to allow plaintiffs to ask for punitive damages — large financial penalties used in the US and elsewhere to punish white-collar crimes — in more types of cases.
One South Korean group that monitors businesses, the People’s Solidarity for Participatory Democracy, called the introduction of punitive damages one of South Korea’s most urgently needed reforms.
“As a result of our decades-long national strategy focusing on economic development, our legal system is too much geared toward protecting industries,” said former Seoul Bar Association president Kim Hyun, who recently collected signatures from 1,000 lawyers supporting punitive damages.
Business groups said that punitive damages could victimize businesses.
“As in the United States, we would see lawyers encouraging lawsuits against companies, costing them time and money in fighting these questionable lawsuits,” said Lee Cheol-haeng, the chief of business policy studies at the Federation of Korean Industries, which represents big businesses in South Korea.
Until recently, the cost of violating South Korean law could be modest, as the Volkswagen case shows.
While South Korea’s Ministry of Environment ordered Volkswagen Korea to recall 125,000 cars sold in the country, it could fine the company only US$12.3 million. Under a law devised to protect local automakers, the government can levy fines up to 1 billion won ($869,680) per model that violates its clean-air law, no matter how many individual cars have been sold. The new law, enacted at the end of last year, would allow up to 10 times that amount, or about US$8.7 million.
By contrast, the US can impose civil penalties of up to US$37,500 per noncompliant vehicle or engine under its Clean Air Act. In all, Volkswagen could face as much as US$18 billion in fines in the US alone.
When the South Korean Ministry of Environment asked prosecutors to seek criminal charges against Volkswagen Korea executives earlier this year, ministry official Han Dong-gon said they were meant partly as “a tool of pressure” to wrest a more satisfactory recall and compensation package from Volkswagen.
The biggest example of resistance to white-collar crime has become Reckitt Benckiser’s local subsidiary. In addition to arrests there, some workers at local companies that made or sold rival products have been arrested on similar charges. Two university professors have also been arrested on charges of manipulating data on Oxy’s toxicity in return for bribes from Reckitt Benckiser Korea.
The families fighting Oxy did not gain national attention until this year. As the scandal threatened to become a major political burden for her government, which championed pro-business deregulation, Park called for a thorough investigation and prosecutors began summoning company officials.
Last month, Reckitt Benckiser Korea apologized and acknowledged responsibility. It also promised to double a humanitarian fund it had founded for victims to US$8.7 million, following a common practice among South Korean businesses in legal trouble to make large charitable donations while seeking lenience in court.
“Although we understand nothing can completely ease the pain of those affected, we are working to make amends as best we can,” Reckitt Benckiser Korea said in a statement.
Some of the families say that is not enough.
“It has been as if there were only victims but no perpetrators,” said Kang Chan-ho, whose daughter struggles with lung damage after his family used one of the toxic disinfectants. “We have been ignored both by the government and by the businesses.”
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