Heroes at Hanjin?

Kim Sang-jo, the “chaebol sniper”

This would all make an interesting movie – full of colorful characters, intense conflict, mounting tension, and stunning reversals – except for the fact that it’s all just too sprawling a story, with too many villains and, so far, no hero.

What are we talking about here? We’re talking about the large-scale corruption at the uppermost levels of the South Korean government and business sector that, in the last couple of years, has made for some high drama, complete with palace intrigue, smoking guns, and courtroom clashes. What is required here is a screenwriter who can tame this tale and foreground a single arresting plot line.

Park Geun-hye

But what to foreground? OK, take a deep breath, here goes: in the brief period since 2017, we’ve seen the removal from office – and long-term imprisonment – of South Korea’s first female president (Park Geun-hye) after she was caught doing underhanded deals, through her shady best friend (Choi Soon-sil), with top business leaders – who, as usual, went scot-free – and her replacement by a self-styled “reform” president (Moon Jae-in), who, making bold promises to rein in the power and corruption of the increasingly unpopular chaebols – those massive, family-run conglomerates that dominate that nation’s economy and that operate with impunity – installed an antitrust czar (Kim Sang-jo), widely styled the “chaebol sniper,” who started off his three-year term with a lot of tough rhetoric about cutting Samsung, Hyundai, and other chaebols down to size, only to tone down his language in recent months and talk, instead, in pathetically humble language, about requesting modest alterations in the chaebols’ organizational charts, even as the president himself began getting all chummy with the chaebol leaders, apparently having decided that he needed them on his side if he wanted to kick his country’s weak economy back into high gear.

Moon Jae-in

Phew. So does that mean we’re back at square one? Not exactly. Because, as we’ve mentioned before, while President Moon and his “sniper” seem to have dwindled into impotence and irrelevance, the cause has been taken up by some of the people who actually own sizable chunks of the chaebols but who, in keeping with the curious (indeed, unique) traditions of the chaebols, have been systematically denied any meaningful input into the governance of the conglomerates. The bizarre fact, which remains unchanged, is that in most cases, the families that founded the chaebols and that still hold the key leadership positions in them don’t own a majority or even a plurality of shares in those firms. Indeed, some of the chaebol royal families would, under ordinary Western circumstances, be considered negligible minority stockholders.

Choi Soon-sil

No surprise, then, that as the South Korean economy falters and the chaebols, immense though they are, look more and more as if their best years are behind them, investors – most of them foreigners, many of them Americans – who have plunged large sums of money into the chaebols are increasingly frustrated at their own lack of power to initiate significant changes. The unfortunate truth is that while the men who founded the chaebols were business wizards, their children and grandchildren, who now sit behind the big desks in the corner offices, don’t necessarily have what it takes to run some of the world’s largest corporations. Meanwhile, many of those investors have proven track records at turning failing businesses around – at spinning off or closing down certain subsidiaries, at recognizing the need to hire or fire certain executives, and at successfully restructuring extraordinarily diversified conglomerates to maximize efficiency and profits.

Cho Yang-ho

So it is that, as Kim Jaewon of Nikkei reported on January 21, Korea Corporate Governance Improvement (KCGI), a newly founded South Korean activist fund that is now the second largest shareholder in the Hanjin Group (whose most famous holding is Korean Air), is pushing it to sell its hotel chain, which includes the Wilshire Grand Hotel in L.A. and the Waikiki Resort Hotel in Hawaii, and to form an independent committee that would select Hanjin’s CEO and other top leaders. Now that would be real reform – a change in policy that would actually make it possible to remove from office the scarifyingly rich and corrupt members of one of the chaebol royal families – in this case, the notorious Cho clan, which owns 29% of Hanjin – and replace them with new, competent, and even (could it be?) clean outsiders.

Cho Hyun-min

Such a transformation would mean the departure of company chairman Cho Yang-ho, who last year was indicted on embezzlement charges; of his wife, who has been probed for smuggling; of his daughter Cho Hyun-min, who was accused of assaulting an ad-agency executive; and of another daughter, Cho Hyun Ah, whose outrage at a flight attendant who served her macadamias in a bag and not on a plate led to a scandal and a legal mess that made headlines worldwide. In short, it’s a family that Hanjin, and South Korea generally, would be much better off without.

Bottom line: the protagonists in this drama may turn out, in the end, to be these so-called activist investors. Screenwriters, stay tuned.

Wherein we take yet another snipe at the pathetic “chaebol sniper”

Now here’s a new twist.

As we’ve recounted in some detail on this site, South Korea is going through a rough patch, economically speaking. In the decades after the Korean War, the country grew with remarkable rapidity from an undeveloped backwater into an international powerhouse. Leading this spectacular advance was a relative handful of family-run conglomerates, known as chaebols (the plural in English is often rendered as “chaebol”), whose names – Samsung, Hyundai, etc. – have become famous around the world.

For decades, the chaebols were the engines of the South Korean economy. The nation’s populace looked up to them. The dearest hope of South Korean parents was that their kids would someday go to work for one of the chaebols. In recent years, however, there has been a discernible shift in public attitudes toward the chaebols. For one thing, they’ve increasingly been seen as crowding out new businesses and thus stifling both competition and innovation – thereby making it hard for the South Korean economy to grow even further. For another thing, as ordinary South Korean citizens have grown more and more accustomed to the idea of democracy and equal treatment under the law, they’ve also grown tired of the shameless double standards that have allowed the chaebol dynasties to get away with corruption on a massive scale.

Moon Jae-in

When Moon Jae-in became president in 2017, he promised to clean up the chaebols. Other presidents before him had made the same promise – among them his immediate predecessor, Park Geun-hye, who is now in prison because of illegal transactions with chaebol kingpins. But Moon insisted he really intended to tackle chaebol corruption. To prove it, he put the nation’s Fair Trade Commission in the hands of a fellow named Kim Sang-jo, who called himself the “chaebol sniper.” One gathered that President Moon had put the toughest guy he could find on the job – a sort of cross between Clint Eastwood’s Dirty Harry and the Charles Bronson character in Death Wish. A fella who would make the bigwigs at Hyundai and Samsung tremble in their office towers and give them nightmares in their lavish mansions.

Kim Sang-jo

In fact, when it came to scaring the heck out of South Korea’s industrial giants, Kim turned out to be more like Kim Novak than Clint Eastwood. As we’ve noted, Kim, who at first came out with guns blazing, has more recently presented himself as a “reasonable reformist” who wants to nudge the chaebols, ever so gently, toward “evolutionary reform.” On January 3, in response to an extensive interview with Kim that appeared in the Korea Herald, we concluded that Kim was now yet another public official in Seoul whose posture toward the chaebols was that of a “servile brownnoser.”

Samsung honcho Jay Y. Lee being arrested last year for massive corruption; in accordance with time-honored South Korean practice, he was later given a suspended sentence

Well, it turns out that the Korea Herald story wasn’t the last word on Kim Sang-jo. On January 17, Kim Jaewon and Sotaro Suzuki reported in the Nikkei Asian Review that the sometime “chaebol sniper” was now – gasp – actually taking an adversarial position toward the chaebols. Or, at least, toward the people who run them. The ruling chaebol families, said Kim, “have lost the aggressive entrepreneurship that was shown by the generations of their founding grandfathers and fathers.” The current chaebol bosses, Kim continued, “were born as if they were princes in a kingdom. As the character of the families has changed, the decisive and quick decision-making process of the past has been replaced by a policy that focuses on the status quo to preserve their established power.”

True enough. Funny it took him so long to say so. Everybody else already had.

Hyundai chairman Chung Mong-koo

Kim went on to suggest that the people who have inherited their positions of power at the chaebols need to step down – or at least step away – from their posts, perhaps exchanging the title of CEO for that of Chairman, and choosing to concentrate on long-term strategy while allowing professional managers to make day-to-day decisions.

It doesn’t sound like a bad idea, at least to start with. But is Kim going to use his power to pressure the chaebol dynasties to do this? Or was this simply meant to be a modest suggestion from a man who, with every major media exposure, seems more and more determined to project a modest image? Apparently the latter. For Kim then went on to say: “If you thought I am a chaebol killer, you misunderstood me. The only way to succeed in chaebol reform is to make it predictable and sustainable.” Meaning what? Well, one’s first reaction is that this comment seems to have been formulated in such a way as to mean just about anything to just about anybody. It’s not a policy statement but a political slogan, every bit as empty and meaningless as “hope and change” or “stronger together.” No wonder both Moon and Kim are plunging in the polls.

Marriage, chaebol style

 

Yes, they are royal families.

There’s nothing quite like them anywhere else in the world. The clans that run the South Korean chaebols – the relatively small number of sprawling, internationally famous conglomerates that have dominated that country’s economy since not long after the Korean War – have long been viewed as royal families. The top executive positions at these companies pass down from generation to generation; the men (they are almost invariably men) who hold these offices wield enormous power over the nation’s political class; and the sons and daughters of these bosses are celebrities, whose social lives are followed closely in the popular media, and who are often, indeed, described as princes and princesses.

Hyundai headquarters, Seoul

One thing that these chaebol families have in common with actual royal dynasties is the high level of intermarriage between them. According to a new survey, 49.3% members of the founding generation of the chaebol clans – the people who actually established these firms in the second half of the last century – are or were married to spouses who also belonged to families that founded chaebols. Among members of the second generation of chaebol ruling families,the figure is even higher: 52.7% of the people whose parents founded chaebols married other people who parents also founded chaebols.

In South Korea, just as the management of chaebols is almost universally dynastic matter, politics is also very often a family game. Former President Park Geun-hye, for instance, who is currently behind bars because of her involvement in chaebol corruption, is the daughter of former President Park Chung-hee. Many chaebol family members who do not marry into other chaebol families have, instead, married into powerful political families, which both reflects and reinforces the intimate ties that bind chaebol CEOs and Chairmen to officials at the highest level of the South Korean government. Among members of the first generation of chaebols, 23.4% were or are married to members of “powerful” political families; in the second generation, this figure declined to 7.4%.

Park Geun-hye

The survey produced some other interesting findings. Of all the chaebols, the GS Group, had the highest number of “in-law relations” with other chaebols, namely seven. GS, like most of these conglomerates, is highly diversified, although in its case there is a particular emphasis on oil, gas, and other energy-related products. The second chaebol on the list, with six “in-law relations,” was the LS Group, which manufactures power cables, electrical equipment, machinery, and other such products.

Why does any of this matter? Because these statistics serve to reinforce the perception, on the part of many ordinary South Koreans, that their country – in which democracy has, admittedly, made great strides over the last several decades – is still, to a deplorable extent, governed by a network of business and political kingpins, people who are tied to one another not only by shared financial interests and systematic corruption but, yes, by the most intimate of family bonds.

Finally: street protests against chaebol corruption!

Moon Jae-in

On this site we’ve been reporting for some time on the lavish vows by South Korean President Moon Jae-in to reform the chaebols, those massive family-run conglomerates that have served as the foundation of that country’s economy since not long after the Korean War – and that have increasingly been viewed with disfavor by that country’s citizens because of their extraordinary levels of corruption, nepotism, and impunity, not to mention their power to choke potential competitors in the cradle.

We’ve introduced our readers to Kim Sang-jo, not exactly intimidating man who was supposedly delegated by Moon with the task of challenging chaebol corruption and who, laughably, calls himself the “chaebol sniper.” And we’ve discussed the chaebol shareholders who, after years of biting their tongues, are finally starting to rebel against the bizarre system whereby clans that own only a small percentage of their companies nonetheless rule them with an iron hand.

Kim Sang-jo

Now comes some encouraging news. On November 21, with the backing of the Korean Confederation of Trade Unions (KCTU), more than 150,000 South Korean workers walked out of factories at firms like Samsung and Hyundai in protest against the utter failure of Moon’s government to come across with the chaebol reforms he promised.

The KCTU did not mince words in describing the situation in South Korea. “There has not been any real progress in chaebol reform,” it said. The KCTU added: “We think our labour rights as well as corporate reform have actually worsened under the Moon administration.”

Park Geun-hye

The KCTU further noted that the chaebol kingpins Lee Jae-yong (Samsung) and Shin Dong-bin (Lotte) had recently been arrested, tried, and convicted of bribing former President Park Geun-hye (who left office in disgrace because of the scandal) only to be given suspended sentences. Such special treatment for chaebol top guns is a longstanding tradition in South Korean politics and jurisprudence, and one that is making the nation’s citizens increasingly restive.

Hence the worker walkout.

Lee Myung-bak

That November 21 protest, moreover, was only one part of a growing nationwide uprising against President Moon. Every weekend of late, South Koreans have poured into the streets of Seoul in huge numbers to express their rage over Moon’s failure to keep his pledges. Describing these demonstrations as “raucous,” the Financial Times noted that while President Park and another former president, Lee Myung-bak, have ended up behind bars for corruption, the chaebol masters who were involved in the same acts of corruption still seem to be above the law.

According to FT, the probability that a chaebol boss convicted of corruption will get a suspended sentence exceeds 70% – while the comparable rate among non-chaebol leaders is 40%. As for poor schlubs who are found guilty of “street crimes,” such as petty theft, only 20% of them can expect to have their sentences suspended, even though the scale of their crimes is, of course, outrageously trivial compared to the monstrous malfeasances routinely committed by chaebol royalty.

Another chaebol tale

In what country do the heads of the top half dozen or so corporations get arrested for corruption, found guilty, sent to prison, and then pardoned more often than in South Korea? The answer must be: none.

Chey Tae-won

Case in point: Chey Tae-won, chairman of SK Group, one of the half dozen largest of South Korea’s chaebols, the family-run conglomerates that dominate that country’s economy and whose leaders are part of an intricate network of power that ties them inextricably to the people at the very highest levels of government. In 1988, as if to demonstrate this high-level intimacy, Chey, who was the nephew of SK’s founder, married Soh Yeong Roh, the daughter of South Korea’s then president, Roh Tae-woo. The wedding took place at the Blue House, Seoul’s answer to the White House.

Five years later, in 1993, Chey was found guilty in a California court of breaking U.S. money laundering laws and of “smurfing,” which means “breaking up deposits into smaller amounts to avoid reporting cash transactions of $10,000 or more as required by law.”

Roh Moo-hyun

That was just the start. Ten years later, on February 23, 2003, Chey was arrested in South Korea on charges of insider trading. The arrest came only days before the inauguration of President Roh Moo Hyun, who, like many other South Korean presidents before and after, had declared his intention to reform the chaebols – which, while being credited with turning South Korea from a Third World country to a leading economic powerhouse, are also cesspools of high-level corruption. Among the 2003 charges against Chey was that he had plotted to increase his ownership share in SK by nefarious means and thereby to solidify his control of the conglomerate, which at the time consisted of no fewer than 58 separate firms. That June, after prosecutors uncovered $1.3 billion in accounting irregularities, Chey was sentenced to three years in prison.

Soh Yeong Roh


Once a crook, always a crook. In January 2012, Chey was indicted for embezzling over $40 million, which he sunk into personal investments. A year later, having meanwhile resigned as chairman of SK Group (while remaining chairman of the conglomerate’s holding company, SK Holdings), he was found guilty and sentenced to four years in prison. “The ruling,”
reported Yahoo News, “comes as South Koreans demand a tougher stance on crimes committed by bosses of chaebol.” The Seoul court that sent him to jail described his case as an example of how chaebol bosses “treat company assets as personal property.”

Park Geun-hye

In any event, that “tougher stance” against the chaebols didn’t last long. It never does. President Park Geun-hye – who had passionately vowed to crack down on chaebol corruption, but who is now in prison herself for involvement in chaebol corruption – pardoned him in August 2015. In March of last year, prosecutors questioned Chey, who in the interim had resumed chairmanship of the SK Group, as part of their investigation into President Park.

“To many investors,” the Seoul Herald commented a couple of years ago, Chey “seems to embody what’s wrong with Korea’s chaebol-controlling families.” Well, South Koreans are very big on two things: family and continuity. It could be argued that Chey, by retaining the respect of his clan and hanging on to control of SK no matter how many terms he serves behind bars, embodies those values, too.

One ex-prez down, several chaebol CEOs to go

Samsung headquarters, Seoul

In recent weeks, we’ve been reporting – with a good degree of skepticism – on claims by the South Korean government that it’s engaged in a serious, vigorous, and comprehensive effort to curb the power of the nation’s largest capitalist monopolies. We’re referring, of course, to the chaebols, those massive, family-run conglomerates (including Samsung, Hyundai, and LG) that have dominated the South Korean economy over the last half century and more – so much so, indeed, that they routinely kill potential competitors in the womb and thus (as has been increasingly recognized and resented) stifle economic growth, discourage entrepreneurship, and squelch innovation.

Jay Y. Lee

Our skepticism on this front has been undergirded by such events as the sudden and unexpected release from prison, earlier this year, of Jay Y. Lee (Lee Jae-yong), the vice chairman and de facto head of Samsung (and arguably his country’s most powerful figure), after serving only a few months of a five-year sentence for corruption.

As if his release weren’t disappointing enough, Lee has since been invited by President Moon Jae-in, who poses as an anti-corruption warrior, to accompany him and a group of other chaebol bosses on a flight to Pyongyang, where they all explored possible business ties with the fanatically totalitarian, slave-labor-dependent Kim regime. Some reform!  

Lee Myung-bak

Well, there’s news from the supposed chaebol wars. No, a chaebol bigwig hasn’t been tossed in the clink. But another nabob has. On October 5, seventy-six-year-old Lee Myung-bak, who was President of South Korea from 2008 to 2013, was jailed for corruption. Arrested on March 22, he had been charged with receiving hefty bribes from Samsung and other firms, embezzling funds from the government treasury that had been appropriated for use by the nation’s intelligence services, and embezzling $21 million from an auto parts company that he owned through his brother. His sentence: fifteen years behind bars plus a $16 million fine.

Park Geun-hye

He’s not the only former president of South Korea who is currently serving time for corruption. His successor, Park Geun-hye, is six months into a thirty-three-year sentence. Two other South Korean presidents, as it happens, have also spent time in the slammer: Chun Doo-hwan, who held the high office from 1980 to 1988, and Roh Tae-woo, who succeeded Chun in 1988-93, were both convicted of bribery and sedition in 1996, and both were pardoned a year later.

Kim Sang-jo

If there is anything resembling reform underway in South Korea today, it may consist in the fact that corrupt presidents are now more likely to serve out their terms instead of being pardoned after a brief period of incarceration. But of course it remains to be seen whether Park and Lee are in the can for the duration or whether, like Chun and Roh, they’ll get sprung after the headlines die down. In the meantime, the self-styled “chaebol sniper,” Fair Trade Commissioner Kim Sang-jo, has yet to prove that he’s prepared to be as tough on current chaebol leaders as on the former presidents – who are, after all, being put away for engaging in illegal shenanigans with those very leaders.

South Korea: tame chaebol reform, or none at all?

 

Moon Jae-in

In South Korea these days, the billion-dollar question is this: is the administration of President Moon Jae-in serious about reforming the systematic corruption that’s been a national institution ever since Samsung, Hyundai, LG, and the other so-called “chaebols” began dominating its economy?

The history of chaebol criminality – which has largely taken the form of bribes to top government officials – goes back to the years following the Korean War. For decades, the South Korean public has increasingly cried out for reform. President Moon, who took office last year after his predecessor, Park Geun-hye, was removed from office on corruption charges, has called chaebol corruption a “deep-rooted evil.”

But does he mean it? Or are the stiff sentences handed down in August to Moon’s crooked predecessor, Park Geun-hye, and her friend and partner in crime, Choi Soon-sil, a fluke?

Park Geun-hye

Then, of course, there’s the other, depressingly familiar, possibility: will Park and Choi, like their fellow crook, Samsung chief Lee Jae-yong (aka Jay Y. Lee), and a raft of convicted CEO-felons and presidents before him, end up being let out of jail on some technicality that leaves the entire country even more cynical about their judiciary’s dedication to equality before the law?

Kim Sang-jo

Well, so far Park and Choi remain behind bars. And only days after their conviction was affirmed – and their sentences enhanced – by a high court, South Korea’s Fair Trade Commission (FTC) proposed new rules to govern the chaebols. The head of the FTC, Kim Sang-jo, who has acquired the nickname “the chaebol sniper,” has declared his determination to take on the ownership strucures of the two largest chaebols, Samsung and Hyundai.

Bruce Lee of Zebra Management

An abiding problem at these and other conglomerates has been that the families that founded them still rule them like kings, routinely making sweeping managerial decisions while ignoring the input of shareholders. Kim’s stated goal is to diminish the power of those families, whose grip on their conglomerates well exceeds their relative value of their ownership shares in those conglomerates.

How to address that problem? Well, under current regulations, a chaebol must own at least 20% of its listed subsidiaries and 40% of unlisted units. Kim’s new rules would raise those figures to 30% and 50% respectively.

Robyn Mak

That’s not all. Members of a chaebol’s founding family would not be allowed to have more than 15% of the voting rights in a listed affiliate of that chaebol. Other new rules would also limit the power of corporate kingpins to pull off mergers or spin off subsidiaries without shareholder support. They would also clamp down on circular shareholdings and other intra-conglomerate machinations and intensify disclosure requirements.

Yet in the eyes of serious observers, the commission’s proposed changes are too little, too late. “I would give 20 points out of 100, a basic score, to what the Moon government has done for corporate governance reform,” Bruce Lee of Seoul-based Zebra Investment Management told Bloomberg News.

Commentator Robyn Mak called the proposed new regulations “the first rewrite of antitrust rules in nearly four decades,” but added that given the slow growth of South Korea’s economy, the chaebols are in the catbird seat. “That means corporate governance reform probably will wind up weaker than originally anticipated.”

Indeed, modest though Kim’s proposed changes are, “Moon will struggle,” maintained Mak, “to gain political support to enact some of the new ideas.” We’ll keep abreast of developments.

South Korea: Will President Park’s 25-year sentence hold?

Samsung headquarters in Seoul

On the South Korea corruption front, the news keeps outdoing itself.

As we’ve noted before, the South Korean economy is dominated by a handful of conglomerates known as chaebols, all of them run by powerful and famous families. Over the decades, members of these families have been caught committing massive acts of corruption. They used to get away with it, usually, because the chaebols were viewed as having lifted South Korea up into the ranks of first-world nations and the families that ran them were objects of near-reverence. In recent times, however, South Koreans have increasingly viewed the chaebols as a hindrance to further economic growth, and as a result have been less tolerant of corruption on the part of their celebrated bosses.

Park Geun-hye

On this site we’ve been following the biggest corruption scandal in South Korean history. Over the past couple of years, investigators have been probing interactions between Samsung, the largest of the chaebols, and Park Geun-hye, who was president from February 2013 to March 2017. Those investigators eventually found that a close friend of Park, Choi Soon-sil, had taken a huge sum of money from Samsung in exchange for permission from Park to merge two of Samsung’s subsidiaries.

Lee Jae-yong (aka Jay Y. Lee)

The consequences of these findings have been dramatic. A quick round-up: in February 2017, prosecutors arrested Samsung’s de facto head, Lee Jae-yong, known in the West as Jay Y. Lee. In March 2017, Park was removed from office and replaced with Moon Jae-in, who promised the South Korean people that he would take action to limit the power of the chaebols. Alas, this is the oldst promise in South Korean politics. Presidents are always saying that they’ll rein in the chaebols, and they never do. In the same way, the CEOs of chaebols are always being arrested on charges of bribery, embezzlement, and the like, only to go free after little or no time in jail.

And that’s what happened to Jay Y. Lee. Last August, after a five-month trial on a range of charges, he was found guilty of everything and was sentenced to five years behind bars. This past February, however, without any warning, a judge sprung him from prison, providing an utterly absurd excuse for doing so.

To many South Koreans, this stunning move – this instant unraveling of justice – seemed to spell an end to any hopes of real reform.

Choi Soon-sil

Is there any possibility that South Korean authorities will do anything to suggest that they’re serious about tackling chaebol corruption? Look at the case of former President Park, who’s been in jail since last year. This past April, a lower court sentenced Park to 24 years and $16 million in fines for bribery, extortion, abuse of power, and other charges. In late August, a higher court, noting that she’d taken even more cash from Samsung than previously believed, bumped her sentence up to 25 years and $18 million. On the same day, her friend Choi was given a 20-year sentence. Meanwhile, in two additional trials that concluded in July, Park was sentenced to a total of eight more years in jail for breaking election laws and illegally spending government money.

Will these sentences hold? Or will Park and Choi be dealt the same get-out-of-jail-free card that Jay Y. Lee was handed? Stay tuned. In the weeks to come, we’re going to be giving these high-level hijinks the closer scrutiny they deserve.

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.

South Korea kicks out Samsung’s pet prez

Park Geun-hye

For the last few months, we’ve been following the growing South Korean corruption scandal that involves the Samsung Corporation, President Park Geun-hye, and the President’s best friend Choi Soon-sil. In a country where corruption scandals involving ties between top political leaders and the powerful chaebol – the immense, family-controlled conglomerates that are the pillars of the nation’s economy – are a frequent occurrence, the present scandal was the biggest ever.

South Korea’s Constitutional Court

On Friday, that scandal came to a climax as the eight justices on the country’s Constitutional Court voted unanimously to remove Park Geun-hye from the office of the presidency for committing acts that “betrayed the trust of the people and were of the kind that cannot be tolerated for the sake of protecting the Constitution.” The court’s move, which followed the suspension of Park’s powers in December when the national legislature voted for impeachment, and which took effect immediately, was without precedent in South Korean political history.

Choi Soon-sil in police custody

The unseating of Park caused joy in some quarters and fury in others. A protest outside the courthouse by supporters of Park turned violent, with two protesters dying in the melee. As for Park, now that she no longer enjoys the immunity from prosecution that comes with being president, she is likely to be tried on charges of bribery, extortion, conspiracy, and abuse of power for having extorted millions of dollars from Samsung and other firms in collaboration with her lifelong friend Choi Soon-sil.

Lee Jae-yong

Park’s ouster on Friday followed the arrest, on February 17, of Lee Jae-yong, the de facto head of Samsung, and the announcement on February 28 that prosecutors would be indicting Lee “on charges of bribery and four other offenses.” As Choe Sang-hun wrote in the New York Times, “Samsung, the nation’s largest conglomerate, has been tainted by corruption before. But the company has been considered too important to the economy for any of its top leaders to spend time behind bars — until now. The jailing of Mr. Lee, who is facing trial, is another potent sign that the old order is not holding.”

The Constitutional Court’s ruling marked a victory for honest government and above-board business practices. As Choe noted, the constitutional orderliness of the process also demonstrated how how far South Korean democracy has come in the last half-century. Ahn Byong-jin of Seoul’s Kyung Hee University told the Times that “the curtain is finally drawing on the authoritarian political and economic order that has dominated South Korea for decades.”

Park’s supporters clash with police

The verdict may also, alas, turn out to have a serious downside. To quote Choe, Park’s departure “is expected to shift South Korean politics to the opposition, whose leaders want more engagement with North Korea and are wary of a major confrontation in the region. They say they will re-examine the country’s joint strategy on North Korea with the United States and defuse tensions with China, which has sounded alarms about the growing American military footprint in Asia.”

Hwang Kyo-ahn

In other words, South Korea, which in recent years has been a reliable bulwark of democracy in the region, may end up being led by people who are eager to appease Kim Jong-un and Beijing and to distance themselves from the U.S. and other democratic allies. The election to replace Park must take place within sixty days; in the meantime, an ally of Park’s, Hwang Kyo-ahn, will serve as acting president. According to the Times, the Trump government “is rushing a missile defense system to South Korea so that it can be in place before the election.”