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A South Korean President Is Jailed for Graft, but Few Expect Major Change

In the months before Ms. Park was impeached, millions of South Koreans demonstrated in Seoul calling for her ouster, in the biggest popular uprising since protests in 1987 officially ended military dictatorship. Three decades later, government-business collusion had become the nemesis big enough to bring the populace into the streets.

“Chaebol are accomplices!” protesters chanted.

Many South Koreans still speak proudly of Samsung, Hyundai and other chaebol, whose export-driven growth helped lift the country out of the poverty that followed the Korean War. But over the years, frustration has grown with the chaebol, which are widely accused of stifling smaller businesses as well as doing corrupt deals with government officials.

Ms. Park was convicted on Friday of collecting or demanding $ 22 million from three chaebol businesses, including Samsung. She was also found guilty of pressuring 18 chaebol companies into donating $ 72 million to two foundations controlled by Choi Soon-sil, a longtime friend and confidant of the president.

Ahn Jin-geol, a leader of People’s Solidarity for Participatory Democracy, an anticorruption watchdog, said Ms. Park’s downfall spoke well for South Korea’s still-young democracy.


Protests calling for Ms. Park’s ouster from the presidency amounted to the biggest popular uprising in three decades. Credit Jung Ui-Chel/European Pressphoto Agency

“We were ashamed that this kind of corruption still happened,” Mr. Ahn said. “But we South Koreans peacefully unseated a sitting president for corruption and had her convicted in a court of law. How many countries in the world can do that?”

But if Ms. Park’s dramatic ouster reflected a vibrant democracy at work, the scandal also unveiled a deeply flawed political system.

For decades, the government has nurtured the chaebol with favors like tax benefits and a buy-Korea policy. In return, past presidents often treated them like personal ATMs, critics say. If they did not oblige, they say, the businesses feared that the government would retaliate through the tax authorities, government regulators and prosecutors.

The donations to Ms. Choi’s foundations, nominally set up to promote sports and culture, seemed yet another example of this phenomenon. The Seoul district court that convicted Ms. Park ruled that she had coerced chaebol into donating to the foundations. The sums were determined according to the companies’ size, according to the ruling, with Samsung contributing the most: $ 19 million.

Ms. Park also solicited $ 6.5 million in bribes from the hotel chain and shopping mall giant Lotte, the court found. In return, Lotte’s chairman, Shin Dong-bin, wanted government help in regaining a license to run lucrative duty-free shops, the court said. In February, Mr. Shin was sentenced to two and a half years in prison on bribery charges.

“The ruling on Park Geun-hye confirms a pattern we have seen repeatedly: The politician seeks financial gains through blackmailing chaebol, and chaebol oblige so they can win government favors to solve their own problems,” said Chung Sun-sup, editor of a website that monitors the conglomerates.

Another pattern also held true: As in past corruption scandals, few corporate chiefs implicated in Ms. Park’s and Ms. Choi’s dealings seem likely to spend much time behind bars.

Samsung’s de facto leader, Lee Jae-yong, the third-generation scion of the conglomerate’s founding family, is the latest case in point, critics say.

In August, Mr. Lee was sentenced to five years in prison for giving $ 6.7 million in bribes to Ms. Choi and Ms. Park, with a court finding that he had embezzled the sum from Samsung’s coffers. Under South Korean law, a businessman convicted of embezzling more than $ 4.7 million must be sentenced to at least five years in prison. What is more, that term — like any prison term of more than three years — cannot be suspended by a judge.

Nevertheless, Mr. Lee went free in February. An appeals court ruled that the amount of bribes he had offered to Ms. Park totaled $ 3.3 million — less than half the sum originally alleged, and below the $ 4.7 million threshold requiring a five-year sentence. The court reduced Mr. Lee’s sentence to two and a half years in prison, and suspended it.


Samsung’s de facto leader, Lee Jae-yong, fifth from left, received a five-year prison sentence in August in connection with the scandal, but he went free in February. Credit Pool photo by Jeon Heon-Kyun

(The district court that sentenced Ms. Park disagreed with the appeals court, ruling that Mr. Lee had, indeed, offered $ 6.7 million in bribes — a finding that could put him in new jeopardy as the Supreme Court considers his case. Mr. Lee denies having committed bribery, maintaining that he never sought favors from Ms. Park in return for the money he said Samsung was forced to donate.)

Kim Jin-baek, a professor at Chung-Ang University, a business school in Seoul, said the power of Samsung and other chaebol is so pervasive that some government officials will do them favors without a direct quid pro quo arrangement, believing that “Samsung won’t forget and one day will reward them.”

Professor Kim said the corruption between chaebol and the government would not end as long as chaebol’s founding families continued to exert far more influence over their empires than their shares warrant.

A typical chaebol family owns just a small percentage of the conglomerate’s shares but rules it like a fief through a maze of cross-share holdings, installing executives who Professor Kim said work for the family, “not for the interest of shareholders in general.”

Most chaebol scandals have originated in the families’ dubious attempts to ensure that the next generation inherits control, such as arranging for scions to buy shares of unlisted subsidiaries at reduced prices.

Such shady practices make the chaebol easy prey for officials seeking bribes, analysts said.

Time and again, judges overseeing corruption trials have treated chaebol more as victims than as willing accomplices.

On Friday, the Seoul court did not accept prosecutors’ argument that Mr. Lee had provided or promised as much as $ 40 million in bribes to Ms. Park in exchange for government support for a merger of two Samsung subsidiaries. That merger strengthened Mr. Lee’s grip on Samsung Electronics, the world’s largest maker of smartphones and the conglomerate’s crown jewel.

With the economy heavily dependent on chaebol — Samsung alone generates revenues equivalent to one-fifth of South Korea’s gross national product — some South Koreans are wary of disrupting them too much. They credit the controlling families with making daring investment decisions that were possible only because of their unchallenged management control. That strategy has helped Samsung edge out rivals, analysts say.

President Moon Jae-in, who succeeded Ms. Park in May, is pushing for bills that would strengthen the rights of minority shareholders at chaebol and make it harder for their chairmen to enrich their children through dubious business deals. But his party lacks a majority in Parliament, where a pro-business lobby is strong, and the diplomacy surrounding North Korea has been a higher priority for the president.

“The real, hidden power in our country remains chaebol,” said Mr. Ahn.

Source: NYT > World

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