After corruption scandal: Why the Samsung boss is free again

Did the Samsung heir buy his way out of jail?

Samsung heir Lee Jae-Yong is considered the most powerful person in South Korea. So powerful that his prison sentence was shortened for corruption?

In South Korea, it is not the president who is considered the most powerful person in the country, but the boss of Samsung. The impression is confirmed these days: Lee Jae-Yong, head of the multinational corporation that produces smartphones, refrigerators, TV sets, and much more, is being released from prison early for the umpteenth time.

The “national economic situation and the global economic context” in the pandemic are the reason why Lee is a free man again since this Friday, he said. That was the explanation given by Justice Minister Park Beom-kye in a nationally televised address earlier this week. About 800 other people will also be able to walk out of prison when pardons are traditionally issued in South Korea on National Independence Day on Aug. 15.

But by far the most famous, significant, and controversial case is that of Lee Jae-Yong. The 53-year-old heir to the Apple rival is by far the richest person in the East Asian industrialized state. It is generally said in the country that it is not only Lee’s financial wealth that is unmatched in South Korea but also his power. Lee Jae Yong, sentenced to two and a half years in prison for corruption, has been released from prison on parole. He had been in custody since January.

President bribed for merger approval
Lee is alleged to have bribed previous President Park Geun-Hye for approval of a corporate merger, and another case of stock price manipulation is currently pending. He had already been sentenced to five years in prison in 2017 as part of a bribery and embezzlement scandal. However, after an appeal, he was freed in 2018. The Supreme Court of South Korea later ordered the retrial.

The Samsung Group has annual sales of $260 billion (220 billion euros), equivalent to one-fifth of South Korea’s economic output. Time and again, however, there are groans in the country that Samsung is abusing its power for political gain. South Koreans often cynically refer to their country as the “Samsung Republic.”

Almost every person here consumes Samsung products and services in some way: whether in the form of a smartphone or flatscreen, while living in an apartment built by Samsung, or while being born and dying in a Samsung hospital.

Recently, Samsung has also become the biggest player in high culture. In the spring, the Lee family announced it would donate the 23,000-work art collection of decades-long Samsung CEO Lee Kun-hee, who died last October. Now Koreans can admire the Picassos, Chagalls and Korean national treasures in museums.

Donation to the health care system, payment of billions for inheritance

In the midst of the pandemic, Lee Kun-hee’s widow and their three children, of whom Lee Jae-Yong is the eldest, also donated one trillion won (750 million euros) to the health system. The aim is to improve the treatment of rare diseases. Read also: Jair Bolsonaro: Brazil’s president is most corrupt person 2020

The public knows all this very well because the government and major media houses have talked about it extensively and thanked them for it. Praise has also recently been heaped on the fact that the Lees did not try to circumvent the comparatively high inheritance tax rate of up to 60 percent, which means that the state will be left with around nine billion euros after Lee Kun-hee’s death.

It is an unusual generosity on the part of a family that owes its wealth, among other things, to consistent tax avoidance and tax evasion. So over the past few months, there has been repeated discussion in South Korea about how grateful one should really be for the tax payments and gifts. And whether there might be a catch: namely, buying Lee Jae-Yong’s freedom.

At Samsung, this is denied. When asked, it says only: “Vice Chairman Lee’s role is to steer the strategic direction of the company and make decisions for future growth through his insights and global network of business leaders.” Simply put, for Samsung’s fortunes, Lee is extremely important, he said.

What is important for Samsung is important for the whole country

And what is important for a company of Samsung’s stature, many in South Korea recognize, is important for the entire country. In probably no other industrialized country does the influence of large companies weigh as heavily as in South Korea.

The 64 largest “chaebols,” family-run multinationals, account for sales equivalent to 84 percent of the national economy. Therefore, the leading conservative newspaper “Joongang Ilbo” demanded, “This should be about the national interest.” Therefore, “Lee should be released sooner rather than later.” Many other newspapers argued similarly.

The business community is also making such demands. In the spring, the heads of the five largest industry associations asked the president to pardon Lee Jae-yong. After all, Korea is currently going through particularly difficult times. For the country to emerge stronger from the pandemic, Lee’s full ability to act is needed.

Experts not close to the government or Samsung shake their heads. “This is all ridiculous,” says Park Sang-in, an economics professor at the prestigious Seoul National University. After all, he says, Lee Jae-yong was regularly visited by his lawyers in prison. “Surely this shows that he can perform his duties in this way.”

Lee does not shine with entrepreneurial successes

In general, Lee Jae-Yong, unlike his father, has not distinguished himself so far with great successes. In addition to the burning Galaxy smartphones and court cases concerning the intimidation of trade unionists, his aegis primarily includes the consolidation of the company’s business. The company has been less conspicuous lately for venturing into new areas, which has been the hallmark of Samsung’s success for decades.

Lee’s release is one of a series of similar cases. The head of the Hyundai car company, Chung Mong-Koo, was jailed in 2007 for embezzling company funds. A few months later, a court commuted the three-year sentence: Chung should rather do 200 hours of volunteer work and donate 700 million euros. A manager like him, he said, was too important to be behind bars. In 2010, Chung was pardoned by conservative President Lee Myung-bak.

Five years later, Chey Tae-won, chairman of the chemical, energy, and pharmaceutical group SK, was also lucky enough to be pardoned. Because he had embezzled 30 million euros, he was to be deprived of his freedom for four years. Conservative President Park Geun-hye returned it to him after two years.

Large corporations: a “deep-rooted evil

Park’s liberal successor, Moon Jae-in, can’t really afford to do that. On his way to winning the 2017 election, he called the chaebols a “deep-rooted evil.” After all, despite their economic output, they account for barely ten percent of jobs, keep startups down through their market power and thus slow growth. “I will tackle chaebol reform,” Moon promised. Little has happened.

In early June, Moon invited senior representatives from Samsung, Hyundai, SK, and LG – the four largest chaebols – to the presidential palace. One staffer revealed to media that pardoned SK chief Chey had demanded Lee’s release. “I understand your concerns,” Moon had said. “I realize that at a time when the business climate is changing more than before, clearer measures are also needed for the economy.”

Professor Park Sang-in also sees the issue of Lee’s release as one between the rule of law and economic policy. According to him, the latter has won.