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Samsung Woes Deepen amid Signs of Chairman's Summons
Samsung Chairman Lee Kun-Hee

The corruption scandal engulfing Samsung Group deepened last week, with special prosecutors hinting that they may summon Lee Kun-hee, the boss of the nation's biggest family-run business conglomerate.

For almost three months, Samsung has been under intense public scrutiny, after its former top legal executive Kim Yong-chul turned whistleblower over the group's copious alleged corporate malfeasance cases, which range from massive slush funds and bribery to accounting fraud for the succession plans of the Lee family.

Earlier this year, a team of special prosecutors, led by independent counsel Cho Joon-woong, launched a probe into the allegations, which Samsung vigorously denies. So far, the prosecutors have aggressively interviewed Samsung executives as "reference witnesses" and raided several Samsung offices, including Lee's home, to clarify the accusations.

The probe, which has led to travel bans on Lee and dozens of Samsung executives, is starting to investigate whether Lee was involved in a controversial deal in 1996, which critics say helped the 65-year-old tycoon transfer the group's control to his only son, Jae-yong.

"While 33 people were accused in the Everland case, only two ever went on trial," said Yoon Jeong-seok, deputy independent counsel, referring to the 1996 deal that resulted in the conviction of two Samsung executives for letting the junior Lee buy a controlling stake in Samsung Everland Inc., the group's de-facto holding company, for less than 10 percent of its market value.

The Samsung chief was one of the 33 accused in the Everland lawsuit, filed by a group of law professors.

"Dealing with the Everland case is one of our missions," Yoon told reporters, indicating the summons of key Samsung executives, including Lee and vice chairman Lee Hak-soo is is just around the corner. The two Lees are not related.

Though it is too early to say if the Samsung chief could face criminal charges, the whistleblower Kim expressed satisfaction over the investigation so far.

Appearing with a smile at the independent counsel's office for questioning on Friday, Kim said, "I have no complaint about the independent counsel probe. I think the special prosecutors are working very hard."

Asked by a reporter to comment on a media report that a Samsung executive admitted to parts of Kim's allegations over the slush funds, Kim jokingly replied, "In the case of Samsung, the internal education is very strict. The executive may not have been trained well by Samsung."

Kim, who has sought sanctuary after making the accusations against Samsung, is housed by the Catholic Priests' Association for Justice. It is the fourth time the whistleblower has been questioned by special prosecutors since the probe started.

It remains to be seen, however, whether the independent counsel probe — which has nearly four months to complete the investigation — will end up with any concrete achievements.

Last week, special prosecutors expressed frustration, accusing Samsung executives of snubbing summonses and destroying evidence.

"The root cause of Samsung's crisis was the use of convertible bonds issued by amusement park affiliate Everland in the illegal transfer of Samsung's management control from father to son," the nation's largest-circulation daily the Chosun Ilbo said in an editorial on Friday.

"If Samsung refuses to face the law and tries to avoid being investigated this time, the ghosts of its past deeds will continue to haunt it," the editorial reads.

"If Samsung's leadership misreads its situation and public scrutiny, it will lead to trouble for both the conglomerate and Korea's economy," it said.

Samsung, known for its sleek mobile phones and flatscreen TVs worldwide, is a business empire of 59 affiliates with major interests ranging from shipbuilding, hotels and construction to chemicals and clothing. It accounts for nearly a fifth of South Korea's gross domestic product.

Corruption scandals surrounding Samsung aren't a novelty, but the group's chief Lee has previously managed to emerge unscathed.

When a scandal of illegal political payoffs by him and his group snowballed in 2005, Lee abruptly left for the United States and spent four months outside of South Korea. He returned home in a wheelchair when the case was cleared by investigators.

In addition to the ongoing probe, two other incidents are causing Samsung a major headache here.

A public outcry is mounting over compensation, after Samsung Heavy Industries Co., the group's shipbuilding arm, was blamed for an oil spill in December, the country's worst environmental disaster which has devastated the western coast.

In the another blow, the Seoul Central District Court ruled on Thursday that Samsung's Lee and the group's affiliates must pay a total of 2.3 trillion won (US$2.43 billion), including interest, to the creditors of Samsung's failed auto-making company, Samsung Motors Inc.

Yim Jun-seok, a Samsung Group spokesman, said the group was undecided on whether to appeal the ruling.

"The biggest conglomerate in the country is acting like an embarrassed honor student who unexpectedly failed a class," Moon Chang-keuk, vice publisher of the JoongAng Ilbo, wrote in his column for the newspaper last week.

"Samsung reminds me of a dinosaur. It might be too large to react quickly," Moon said. "Or maybe its brain is too small for its body."

"Samsung is facing its biggest challenge," he said. "What Samsung desperately needs is transparency and openness. How Samsung gets that transparency will determine its future." (Yonhap News)

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