In the “Republic of Samsung,” it’s (corrupt) business as usual

Lee Jae-young

For many people in South Korea, the arrest, trial, conviction, and imprisonment last year of Lee Jae-young – that country’s richest man and the de facto head of Samsung, the country’s largest business – signaled the start of a bright new era. After decades of corruption in the chaebols, the powerful family-run conglomerates that have dominated the postwar South Korean economy, the ouster last year of President Park Geun-hye and her replacement by Moon Jae-in, who promised that the traditionally well-connected leaders of these firms would no longer operate with impunity, seemed indeed to represent radical and long hoped-for change.

Park Geung-hye

Yet, as we discussed on Tuesday, all hopes for revolutionary reform were crushed last month when a High Court judge abruptly ordered Lee (known in the West as Jay Y. Lee) freed from prison.

Lee, according to Bloomberg News, “appeared stunned.” So, reported the Wall Street Journal, were “some South Korean lawmakers and legal experts.” The South Korean public was stunned, too. And angry. Street protests ensued. Moon had promised change, but this was business as usual. Over the decades, one chaebol honcho after another had been tried on corruption charges only to be found not guilty, or convicted and then pardoned, or – as happened with Lee’s father in 2008 – given a suspended sentence. Meanwhile, as the New York Times has noted, South Korean courts have “routinely sentenced lesser-known white-collar criminals to far longer terms for lesser offenses.”

Here it was all over again. “The ‘Republic of Samsung’ lives on,” griped Professor Kwon Young-june of Kyung Hee University. The judge’s decision, complained Park Yong-jin, a member of the National Assembly, only “confirmed once again that Samsung is above the law and the court.”

A view of the site of the Pyeongchang Olympics

Indeed. The High Court’s ruling – which came only days before the opening of the Winter Olympics in Pyeongchang, South Korea – is absurd on its face. Among the items of evidence that senior judge Cheong Hyung-sik chose to drop down the memory hole was a set of 39 handwritten notebooks in which an economic adviser to President Park recorded specifics about bribes paid to Park by Lee. Other exhibits in the trial included documentation of exchanges between Park to Lee that made clear the nature of the quid-pro-quo between them.

Samsung headquarters, Seoul

Many commentators had been arguing that South Korea is in the process of changing its stripes; nobody can seriously make that argument now. Lee is a criminal for whom prosecutors sought a sentence of 12 years in prison: that’s how serious they considered his transgressions to be. The prosecutors demonstrated that Lee had committed embezzlement, illegally hidden assets overseas, and lied to the parliament under oath. They proved definitively that he had paid bribes in return for government support for a merger that, as the Financial Times put it, “was crucial for Mr. Lee to cement his hold on the organisation, but was widely criticised for not benefiting shareholders.” As one politician observed, by way of underscoring the absurdity of the High Court’s ruling, Judge Cheong appeared to expect the world to believe that Lee had handed over a fortune to President Park in return for absolutely nothing whatsoever.

So it stands, then. For a brief shining moment there, it looked as though South Korea had experienced a new birth of justice and equal treatment under the law. Alas, Lee’s release shows that under Moon, the old rules remain in place.

Lee is free – and South Korean reform is dead

We’ve been writing about Samsung since September 2016, when we explained the distinctively South Korean type of family-run corporate conglomerate known as the chaebol. “The simple fact,” we noted, “is that pretty much everybody in the South Korean government is on the chaebols’ payrolls – or wants to be. And the growing popular resentment of this grand corruption is an extremely good sign.”

Park Geun-hye

A couple of months later we reported on charges that South Korea’s then President, Park Geun-hye, had helped a friend, Choi Soon-sil, extort huge sums of money from several of the chaebols. The largest chaebol, Samsung, which accounts for some 17% of South Korea’s economy, gave Choi over $15 million. By December 2016, the official probe into this corruption uncovered that the sum extracted from Samsung was closer to $20 million. In return, President Park allowed the merger of two Samsung entities.

Lee Jae-yong (aka Jay Y. Lee)

In January of last year came the news that prosecutors had barred Lee Jae-yong – the de facto head of Samsung, grandson of its founder, Lee Byung-chul, son of its official chairman, Lee Kun-Hee (who stepped down from day-to-day management, but did not relinquish his title, after a 2014 heart attack), and arguably the most powerful man in South Korea – from leaving the country. In February Lee (who in the West goes by the name Jay Y. Lee) was arrested; in March, Park was removed from office.

Her replacement, Moon Jae-in, promised to curb the power of the chaebols, whose domination of the nation’s economy has thwarted new business development, whose cozy ties to government leaders have caused widespread suspicion and resentment, and whose leaders’ ability to escape punishment for large-scale corruption has made them seem to be above the law.

Moon Jae-in

Lee’s trial began in March. Dubbed “the trial of the century” in South Korea, it involved five charges: bribery (maximum possible sentence: five years), embezzlement (eight years) perjury (ten years), concealing criminal proceeds (five years), and hiding assets abroad (life). Prosecutors asked for a sentence of twelve years. In August, after five months of testimony, Lee was found guilty of all five charges and sentenced to five years in prison. He was thereupon “sent to a prison for white collar criminals in Uijeongbu.”

Then, last month, came a startling development. Lee, who had appealed his sentence, was taken from his prison cell and transported to the Seoul High Court. There, presiding senior judge Cheong Hyung-sik informed him that he was to be released immediately and would be on probation for four years.

Lee in handcuffs

Cheong – who, technically speaking, had not reversed or commuted Lee’s sentence but cut it in half and then suspended it – maintained that Lee’s only real offense was to have succumbed understandably to inordinate pressure exerted on him by Park Geun-hye while she was serving as President. “Park threatened Samsung Electronics executives,” claimed the judge. “The defendant provided a bribe, knowing it was bribery…but was unable to refuse.” Not a small number of South Koreans regarded this as a thoroughly absurd argument. 

More on Thursday.