Samsung Chairman Indicted Over Tax
By Kim Rahn
Staff Reporter
The independent counsel investigating the Samsung Group indicted Chairman Lee Kun-hee without detention Thursday on charges of tax evasion and breach of trust.
The indictment concludes a 99-day probe of high-profile corruption allegations involving the nation's largest conglomerate.
Nine other executives, including Vice Chairman Lee Hak-soo and No.3 man Kim In-joo, were also indicted without arrest. Samsung heir apparent Lee Jae-yong and his mother Hong Ra-hee were cleared of all allegations. The special prosecutor announced that Lee hid 4.5 trillion won in borrowed-name accounts, evading 112.8 billion won in taxes.
A lengthy court battle is expected. If found guilty, Lee could face five years to life in prison for tax evasion and be forced to pay up to 560 billion won in penalty taxes, roughly five times the amount evaded. In addition, he risks losing his IOC membership unless the court clears him. Observers predict the Samsung boss is likely to escape jail time, as the court has often been lenient toward CEOs convicted of wrongdoing out of concern that jailing corporate leaders might hurt the economy.
The special prosecutor said his team was unable to find evidence for allegations that Samsung officials bribed prosecutors and ranking government officials with slush funds.
The special prosecutor, Cho Joon-woong, announced the final result of the investigation into the three main allegations against the group ― the creation of slush funds, bribery and illegal wealth transfer from the chairman to his son ― in a televised press conference.
Lee, 66, was charged with breach of trust for overlooking the group's illegal wealth transfer through a below-market price deal of convertible bonds (CBs) of Everland, Samsung's de facto holding company. Cho said his team confirmed that Samsung's strategic planning office, which is the ``control tower'' of the group's alleged irregularities, systematically plotted or orchestrated the father-to-son wealth transfer.
He continued, ``President Kim In-joo and Samsung Card President Yoo Suk-ryul, who were at the office at that time, led the scheme. They reported it to Vice Chairman Lee and former Samsung Corp. head Hyun Myung-kwan, who was an Everland auditor. The plan was also reported to the chairman.''
For the false-name stock account management, the chairman was also indicted for tax evasion. The counsel confirmed Lee kept money and stocks in 1,199 stock accounts under Samsung executives' names. Lee claimed the money was inherited from his late father and group founder Lee Byung-chul.
``The strategic planning office also managed the stocks, and Lee evaded 112.8 billion won in taxes,'' Cho said. Lee was also charged for violating the Stock Trading Law, as he did not report his ownership of the shares to regulators.
Cho said his team failed to confirm the bribery allegations. Samsung whistleblower Kim Yong-chul claimed the group regularly offered kickbacks to key public officials. ``Based on Kim's claim and other circumstances, we suspect the group may have sought to win over public officials systematically. But those allegedly involved denied this and we could not find any evidence,'' Cho said. He described the whistleblower Kim as unreliable and inconsistent.
The counsel cleared the chairman's wife Hong of the allegation that she purchased expensive paintings, including Roy Lichtenstein's ``Happy Tears,'' with the group's slush funds. ``Hong bought paintings worth 25 billion won, but it was Lee's money kept under false names, not slush funds,'' Cho said.
As to why the accused were not detained, the counsel said that Samsung committed the crime to protect the family-oriented management system, not to help fulfill Lee's personal greed.
``We are not seeking detention, as the accused mostly admitted the charges and their absence from management may cause huge damage to the group and the nation's economy,'' Cho said, adding he hopes that the group will be reborn as a top global group with a transparent management system in keeping with global standards. Samsung's chief spokesman Lee Soon-dong made a public apology to the people and customers worldwide.