Special prosecutors said yesterday they had charged Samsung chairman Lee Kun-hee with tax evasion and breach of trust following a three-month probe into South Korea’s biggest business group.
They cleared Lee of bribery, the main allegation made by a former Samsung lawyer turned whistleblower who prompted parliament to appoint the unusual independent probe.
The prosecutors said in a report that Lee, 66, would remain free pending trial, as would nine other executives, including vice chairman Lee Hak-soo, who were also charged.
PHOTO: AP
This was because they had admitted most of the key charges and “in consideration of a negative impact on our economy.”
The hugely influential group accounted for more than 20 percent of South Korea’s total exports last year.
“We hope that the probe will help local companies meet global standards and be born again as the world’s top-class businesses,” the report said.
The team was probing claims by former chief lawyer Kim Yong-chul that the group had created a slush fund totaling 200 billion won (US$197 million) to bribe government officials and politicians.
It also investigated whether control of the group had been illegally transferred from Lee to his son Lee Jae-yong, who is a senior executive of Samsung Electronics.
Lee senior was charged with breach of trust over the illegal transfer. The process, led by senior executives, “was reported to chairman Lee Kun-hee at that time,” the report said.
Lee was also charged with evading a capital gains tax bill of 112.8 billion won.
“The special prosecutors found that 1,199 borrowed-name accounts were used to make profits from the sale of shares in Samsung Electronics and other affiliates ... and 112.8 billion won worth of taxes was evaded,” it said.
But it added that despite extensive raids and tracking of bank accounts, no evidence of bribery emerged.
The report, read on national TV by chief prosecutor Cho Joon-woong, supported past claims that the son acquired control of Everland, Samsung’s de-facto holding company, at a below-market price in the mid-1990s through the issue of low-priced bonds.
“We have confirmed that convertible bonds were issued at remarkably low prices and illegally allotted,” it said.
The prosecutors said Lee’s offences were not driven by greed. They noted that standards have changed in South Korea’s business environment.
“This case is like using today’s stern regulations to crack down on old wrongdoings that accompanied attempts to maintain and manage the governing structure of the company,” the report said.
“Therefore, the case is different from typical breach of trust and tax evasion crimes that stemmed from individual greed,” it said.
The report said Samsung has led the country’s dramatic economic achievements.
“However, it is true that it harbors many structural problems such as suspected illicit transfer of managerial rights, lack of transparency of book-keeping and direct control over subsidiaries through a strategy and planning agency whose existence has little legal basis,” it said.
Samsung said it plans reforms.
“Taking this special prosecutors’ investigation as a new starting point, Samsung is preparing reform plans based on advice from various sectors of our society,” it said, adding details would be announced next week.
The complex management structure of South Korea’s family-run conglomerates known as chaebol often allows founding families to control a group through cross-shareholdings, despite holding a relatively small stake.
The system has long been under fire from reform advocates.
Lee was convicted in 1995 of contributing to a slush fund for former president Roh Tae-woo and received a suspended jail sentence.
He was pardoned in 1997.
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft