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Samsung's Lee in crosshairs as tycoons grilled over scandal

Tuesday, December 6, 2016 - 13:52

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Jay Y Lee, the de-facto head of Samsung Group, became the focus of a public grilling of tycoons in connection with a widening influence-peddling scandal that may cost South Korean President Park Geun Hye her job.

[SEOUL] Jay Y Lee, the de-facto head of Samsung Group, became the focus of a public grilling of tycoons in connection with a widening influence-peddling scandal that may cost South Korean President Park Geun Hye her job.

Two hours into Tuesday's parliamentary hearing, lawmakers directed the vast majority of questions toward Mr Lee, while Hyundai Motor Group chairman Chung Mong Koo didn't get a single query.

Mr Lee, who's vice-chairman of Samsung Electronics, said he never ordered donations to be made in return for political favours and rejected allegations he received any wrongful government support to push through a key merger of two Samsung units last year.

Billionaire Lee was among the nine tycoons summoned on Tuesday by the National Assembly, which opened a hearing as to why the nation's biggest businesses gave tens of millions of dollars to foundations controlled by Choi Soon Sil, the president's confidante at the centre of the scandal that's been roiling the country for weeks.

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It's the first time all the heads of the biggest family-run chaebols, who usually shun publicity, have been called together to testify to parliament.

The hearing comes amid a tumultuous year for an economy that's struggling to maintain economic growth.

Samsung's exploding phones, the collapse of Hanjin Shipping Co and investigations into the conduct of the head of the Lotte retail group eroded confidence in the nation's industrial system.

Its shipbuilding and steel industries are facing difficulties, and Bank of Korea governor Lee Ju Yeol has cited record household debt as a risk to financial stability.

Mr Lee confirmed that Korea's largest conglomerate provided a 1 billion won (S$1.21 billion) horse used for equestrian lessons by Choi's daughter. The tycoon also acknowledged meeting the president twice but said he never felt pressured by Ms Park to fund Choi's foundations. He was asked multiple times when and how he learned of Choi's connections with Ms Park but responded that he couldn't remember the details.

Samsung has been accused of paying bribes to Choi, who allegedly pressed the nation's pension fund to back a merger of affiliates that was opposed by US hedge fund Elliott Management Corp.

In November, prosecutors raided the offices of Samsung Electronics and the National Pension Service, seeking evidence of links between the country's top business groups and the president.

Mr Lee, who strengthened his grip over the family-run conglomerate as a result of the merger, acknowledged meeting officials at the pension fund ahead of the deal but denied the transaction was made for anything beyond commercial reasons.

"The merger of the two companies has nothing to do with my succession," Lee said.

Mr Lee, who has taken on a bigger role since his father's heart attack in May 2014, rarely makes public appearances.

His public statements were his first on a major stage since last year, when he apologised after one of the Samsung hospitals was identified as a source of the Middle East Respiratory Syndrome outbreak that has killed tens of people in the country.

The hearings come as Samsung deals with a number of other crises. The company is already grappling with the fallout from the Note 7 smartphone debacle and pressure from Elliott for a split.

Mr Lee apologised in parliament on Tuesday over the issues with the phone, which was prone to catch fire and explode, forcing a recall and termination of the product line.

Samsung last week said it's looking at a plan to turn itself into a holding company after agreeing to return more cash to investors and add an outside director to its board.

Samsung will spend at least six months on the review. Billionaire Paul Elliott Singer, who leads Elliott, had also pushed for Samsung to list shares on a US exchange, although the company said that it would consider a Nasdaq listing only after it makes decision on the holding company.

"We should have done better by creating more jobs and so on, but I regret and am embarrassed for disappointing the people by getting involved in this shameful incident," Mr Lee said. "I will do my best to improve our system and myself so that we can become a better company."

Besides Mr Lee and Hyundai's Chung, Lotte Group chairman Shin Dong Bin and SK Group boss Chey Tae Won faced questioning over allegations that their businesses donated money to foundations controlled by Choi in return for duty-free business licenses. Both Mr Shin and SK denied any wrongdoing. LG Group's Koo Bon Moo, Hanwha Group's Kim Seung Youn, Hanjin Group's Cho Yang- Ho, CJ Group's Sohn Kyung Shik and GS Group's Huh Chang Soo also sat in on the hearing.

On the political front, Ms Park has said she's willing to step down after hundreds of thousands of Koreans took to the streets in recent weeks to call for her resignation and arrest over the scandal. 

Prosecutors named her a suspect in an alleged scheme to extract money from the companies and she faces an investigation by a special prosecutor in the coming weeks. Ms Park has denied she sought any personal gain and has apologised for the scandal three times.

Opposition lawmakers are pushing to impeach Ms Park, whose single, five-year term is scheduled to end in early 2018. If parliament votes to impeach her, the Constitutional Court has to approve the motion within 180 days. A residential election would follow in 60 days if the court confirms her impeachment.

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