Samsung boss faces arrest over bribery

South Korea’s special prosecutors’ office said it will seek a warrant to arrest the head of Samsung Group, the country’s biggest conglomerate, as a corruption scandal engulfing president Park Geun-hye escalated on Monday. Prosecutors also tacked on charges of embezzlement and perjury on top of the bribery charges. A Seoul court will review the request for his arrest Wednesday and will likely decide on it within this week.

The prosecution expected Park to agree to questioning but had yet to discuss details with her office, Lee Kyu-chul, spokesman for the special prosecutor, told a regular media briefing. Samsung is, to all intents and purposes, a family-run business in South Korea, with Lee Jae-yong playing second fiddle to his father, company chairman Lee Kun-hee. Since the counsel team has yet to question the President, its decision to seek an arrest warrant for Lee seems hasty. The special prosecutor’s conclusion is that Lee made illicit requests to President Park Geun-hye and offered a bribe to her confidante, power broker Choi Sun-sil, to complete a generational transfer of management rights. Lee has denied any wrongdoing.

Each time, his criminal record was later erased in presidential pardons, and he soon returned to Samsung’s leadership.

How will this affect politics in South Korea?

The scion is vice chairman of Samsung Electronics, the firm’s flagship subsidiary, and the de facto head of the group after his father suffered a heart attack in 2014.

The recall saw Samsung take a 6.1 trillion won ($5.2 billion) blow to operating profit over three quarters, and was reported widely, damaging the manufacturer’s reputation globally. Its crown jewel, Samsung Electronics, alone accounts for 20 per cent of South Korea’s total exports.

Harman shareholders also stated their objection to the terms and conditions of the contract, where the company agreed to not consider other potential bidders except Samsung. Samsung insists it “did not make contributions in order to receive favors”, and says it’s confident “the court will make the appropriate judgment on this matter”. It is alleged the company provided $36.42 million to businesses and foundations set up by a friend of Park to secure a merger between two Samsung affiliates.

Prosecutors have indicted a former health minister, Moon Hyung-pyo, for allegedly abusing his power in asking the national pension fund to support the Samsung merger plan at Park’s request.

Samsung came under criticism at that time, particularly from NY hedge fund and activist shareholder Elliot Management, who tried, unsuccessfully at the time, to block the deal.