What are the chaebols?

Corruption takes a variety of forms. In Brazil, as we’ve seen, innumerable politicians have grown rich by ripping off the state-owned oil firm, Petrobras. In neighboring Argentina, a gang of Kirchner cronies diverted billions from infrastructure projects into private offshore accounts. In Gabon, President Bongo plays it simple: he treats the national treasury as his own piggy bank and buys himself mansions, yachts, limos, and planes while the average Gabonese citizen scrapes by on $12 a day.


Then there’s Korea. Not Kim Jong-un’s Hermit Kingdom, which is undoubtedly the most totalitarian corner of the planet. No, today we’re talking about South Korea.

“South Korea?” you ask. “Benign, prosperous, democratic, free-market South Korea, America’s steadfast ally and Ground Zero for the East Asian economic miracle? How corrupt can South Korea be?

Samsung headquarters

This corrupt. In South Korea, as it happens, the power structure consists of two intimately interlocking parts: on the one hand, the president and other duly elected government leaders; on the other hand, a small number of huge family-run conglomerates that are uniquely South Korean in their origins, configuration, and societal significance, that have not been elected to anything by anybody, and that are, in effect, themselves the corporate equivalent of dictatorships.

These companies – among them such world-famous enterprises as Samsung, Hyundai, and LP – are known as chaebols, from the Korean words for wealth (chae) and clan (bol). They function like no other companies in the world.

Samsung chairman Lee Kun-hee was Fortune Korea’s CEO of the Decade

In English-speaking countries,” explains a Seoul professor of public administration, “there really are no business groups, but singular companies that own [their] subsidiaries 100 percent. In Europe, conglomerates are never as big as the chaebols and ownership and management [are] usually strictly divided.” A chaebol, by contrast, consists of “multiple companies with robust internal transactions, all controlled by a single, near all-powerful chairman that act[s] as both manager and the de facto owner of the entire enterprise.”

It’s no exaggeration to say that the chaebols made South Korea. Over the last half century, they led the way in turning a poor agricultural backwater into an international technology center and economic powerhouse. In the process, they assumed a role in South Korean society that can be hard to explain to outsiders. The members of the families that run the chaebols are national celebrities; the companies themselves are mighty, majestic, nearly mythical colossi, looming above the everyday world of ordinary citizens in such a way that their very names almost carry a touch of magic.

SK Group headquarters

Look at it this way: elected officials are mere mortals who come and go; the chaebol clans, like so many royal families, stay on forever, never yielding power or stepping down from Olympus.

As Iain Marlow wrote last year in the Toronto Globe and Mail, “all South Korean mothers dream of their children working at chaebol companies.” And yet even those mothers realize that the chaebols – which a generation ago were universally revered for having effected South Korea’s miraculous transformation – now pose a threat to their country’s continued growth, to its people’s economic and political freedom, and to its attempts to achieve full legitimacy and recognition on the world stage.

They realize, indeed, that these conglomerates that liberated them from poverty now – in a very real sense – are enshackling them.

How so? We’ll get around to the fascinating details tomorrow.

Messi business

Messi-490728You may never have heard of Lionel Messi, but to millions of soccer fans the 28-year-old Argentinian is a superstar. A forward for FC Barcelona, which has a larger social-media following than any other sports team in the world, as well as for Argentina’s national team, Messi holds all kinds of goal-scoring records and is considered by some observers to be the best player ever in the history of the sport.

Ali Bongo

He’s also, as it turns out, a useful stooge for none other than Ali Bongo, “president” of Gabon, whom we wrote about here a couple of months back. Bongo’s dad was “president” of the small country on the west coast of Central Africa from 1967 to 2009, and Bongo has been in charge ever since the old man shuffled off this mortal coil. As we noted in July, the Bongo family has made an art out of systematic, institutionalized corruption, treating the country’s cash as its own and using it to purchase dozens of luxury residences around the world, plus whole fleets of cars, boats, and planes, while the average Gabonese citizen squeaks by on $12 a day.

But Bongo’s shameless, large-scale embezzlement is only the most benign of his offenses. In recent years, as it turns out, many Gabonese children have been the victims of a practice that seems almost too terrible to be believe: they’re kidnapped, ritually murdered, and then cannibalized by members of the nation’s elite in the belief that this barbaric act will, by some supernatural means, bring them even greater wealth and power. It’s widely believed that Bongo himself is behind these twisted ritual crimes. In any event, Bongo’s government has refused to investigate them.

Messi and Bongo

Enter Messi, who, as it happens, is an “ambassador” for UNICEF, the United Nations Children’s Fund, in addition to having his own charity, which focuses on “access to education and health care for vulnerable children.” In July, construction of a new soccer stadium in Gabon – which is being built for the 2017 Africa Cup of Nations, to be hosted by Gabon – began with a cornerstone-laying ceremony at which Messi was the guest of honor. Messi reportedly was paid €3.5 million for showing up at the event, although both Argentina and Gabon have denied that he was paid anything.

Messi and Bongo at cornerstone-laying ceremony

In any event, he went. In addition to laying the cornerstone for the stadium, he paid a visit to a hospital and took part in the opening of a Bongo-owned restaurant. And throughout the visit, according to the U.S.-based Human Rights Foundation (HRF), he “displayed enthusiastic support” for Bongo’s regime – a PR coup for Bongo and, as HRF observed, a blow to the credibility of Messi’s foundation. There’s no indication that this UNICEF “ambassador” said a single word, at any point during his stay in Gabon – every step of which was covered extensively by state-owned television – about his host’s refusal to investigate the ritual murder of children.

In Gabon, Bongos play you

Ali Bongo Ondimba

In April, an article in Britain’s Daily Mail drew attention to a head of state who’s virtually unknown in the Western world: Ali Bongo Ondimba, President-for-Life of the small West African nation of Gabon. Bongo, wrote reporter Sebastian Shakespeare, “is Prince William’s closest ally in the fight against ivory poaching in Africa.” But now, it appeared, he could turn out to be “a source of acute embarrassment” to the prince.

Why? Because Gabonese oil minister Etienne Dieudonne was “considering levying tens of millions of dollars in tax penalties against the energy giant Shell, which has operated in the West African country since 1960.” If this taxation plan were put into effect, explained Shakespeare, it would “plunge relations with Gabon into the deep freeze” and make it “very tricky for William to continue his relationship with Bongo,” who’d previously been viewed by British diplomats “as a devoted Anglophile who was expected to seek Commonwealth membership for the former French colony.”

There was something very curious about Shakespeare’s article, and it was this: his clear implication that Bongo wasn’t already “a source of acute embarrassment” to the British prince. After all – as Shakespeare himself noted – Bongo, whose father ruled the country before him for 41 years, has “long been dogged by accusations of nepotism and money laundering.”

Bongo and family members at one of their French homes

And that’s putting it mildly. Every year, the Bongo family – which has been described as carrying out “institutionalized pillaging of public resources” and as treating “the national treasury like its own private bank account” – skims about 25% off the top of Gabon’s massive oil revenues. The family owns 39 luxury houses and apartments in France, including a 14-bedroom, 48,ooo-square-foot, $130 million mansion on Paris’s upscale rue de l’Université that’s the most expensive residence in France.

Bongo’s French real estate, moreover, is only a small fraction of his empire. He also has a £50 million house in Mayfair, and until recently owned a Boeing 777 jet, which Paris police seized in connection with a lawsuit. This wasn’t Bongo’s first unpleasant brush with Gallic cops: in February 2013, the gendarmes raided a Bongo-owned villa in Nice in connection with a graft investigation. 

“The most expensive residence in France”

There’s even more. In February 2014, the Wall Street Journal reported that the U.S. Justice and Homeland Security departments were looking into American properties linked to the Bongo family in an effort “to determine whether any assets are traceable to public corruption” in Gabon. And this spring, it emerged that Bongo and his 50-odd siblings were warring in French courts over the family fortune, and that the struggle was bringing to light new information about their wealth – and the elaborate system of institutionalized corruption that made it possible. Among the contested family assets, it turns out, are clandestine bank accounts in Monaco containing at least hundreds of millions of dollars, plus “scores of luxury villas…around the world,” not to mention “planes, boats, art and huge stakes in Gabon’s key industries.” Oh, and let’s not forget Bongo’s “vast fleet of hundreds of luxury cars including Mercedes, Maybachs and Rolls Royces.”

Bongo with U.S. President Barack Obama
Bongo with U.S. President Barack Obama

Meanwhile, nearly a third of Gabon’s citizens live in poverty; the average Gabonese makes $12 a day.

All this being the case (and having been widely known to be the case for several years now), it was bemusing, at first glance, to see Sebastian Shakespeare suggesting in April that Ali Bongo had now, suddenly, because of a possible plan to levy a tax, emerged as a potential embarrassment to Prince William – as if Bongo’s years of shameless, limitless rapacity weren’t already more than enough of an embarrassment.

M. le Président and Mme. Bongo, Prince Harry

On second thought, however, we realized that there wasn’t really anything bemusing about Shakespeare’s article. On the contrary, it reflected a way of thinking that’s very familiar in the Western world today – a way of thinking that not only takes for granted the prodigious scale of corruption by African heads of state but accepts it, with a complacent shrug, as an endemic and intractable element of life on that continent. Most of Prince William’s countrymen, we reflected, would probably react with indifference to the news that he’d teamed up with the likes of Bongo to fight ivory poaching. After all, it’s a worthy cause, isn’t it? The House of Windsor can’t change the world, can it? 

Prince William

No, it can’t. But what it can do, and does routinely, is to take actions that send a message. And the message that Wills is sending by working with Bongo is not a welcome one. Intentionally or not, he’s doing the tyrant a massive favor – whitewashing his crimes, lending him legitimacy, providing him with an image reboot of a sort that the world’s best PR people could only dream of. The prince should understand this, and respond by acting responsibly. And he should understanding something else, too: that Bongo’s involvement in this partnership with him is almost certainly motivated by nothing more or less than a cynical desire to get precisely such a publicity boost.

Let’s face it: could a dictator who’s plundered so wantonly from his own people, accumulating palaces while his people try to scrape by on $12 a day, truly care all that much about the fate of elephants?