Independent probe kicks off to target ‘Samsung’s bribery’

The independent counsel investigation team led by Park Young-soo, which is investigating the Choi Soon-sil gate, raided and searched the National Pension Service and the Health and Welfare Ministry soon after its inaugural ceremony on Wednesday. The independent counsel said, “The raid and search was conducted to secure evidence of bribery to a third party by Samsung and dereliction of duty by the National Pension Service.” Concluding its 69-day investigation into manipulation of state affairs on December 11, the prosecution applied eight different charges against President Park Geun-hye including abuse of power, leaks of classified public information, and attempted coercion. The independent counsel will likely focus its probe on securing evidence for suspected bribery, over which the prosecution waived legal judgment.

Currently, Samsung is under heavy criticism that the conglomerate served as a private coffer for Choi Soon-sil and her daughter Chung Yu-ra. Recent news reports have informed circumstantial evidence that Choi and her daughter used Samsung’s money to purchase all different personal items ranging from coffee and ice cream to a pad for their dog. The reports suggested that after Samsung transferred money to Core Sports owned by Choi, Choi withdrew money in the name of reimbursement of expenses.

If Samsung provided the fund last year to compensate for the National Pension Service’s approval at the time of the merger between Samsung C&T and Cheil Industries despite expected financial losses, the money could be construed as being a reward. In the parliamentary investigation of state administration on December 6, Samsung Vice Chairman Lee Jae-yong said, “Regardless of whether it was corporate social responsibility contribution or a grant, we don’t provide funds as a reward.’ Samsung has constantly argue that the fund was provided to assist all jockeys as the Korea Equestrian Federation’s main sponsor company, but no other jockeys were selected and Chung Yu-ra was the only athlete to benefit from Samsung’s support.

If Samsung is convicted for bribery charges, it will not only tarnish Samsung’s corporate image but also negatively affect its finances and overall business operations. World-leading institutional investors are excluding companies that violate the U.N. rules on corruption prevention from their investment portfolios. If Samsung is classified into a company unqualified for such investment and as a result institutional investors pull out their investments in Samsung en masse, the conglomerate will see its stock price plunge and find it difficult to raise new funds through capital increase in the future. In the U.S., companies that are punished for briberies are banned from submitting a bid for a state project.

The APG of the Netherlands, one of the three largest public pensions in the world, recently sent an investor’s inquiry to Samsung Electronics to ask the latter’s stance on cozy relationship between the conglomerate and the government and how to address the issue. Samsung already announced a plan to bolt from the Federation of Korea Industries and dismantle its strategy and future planning office, but such measures are hardly sufficient for the company to be able to regain trust in the global market. If Samsung Vice Chairman Lee Jae-yong makes public declaration that he will completely cut back-scratching alliance between the conglomerate and the government, it will provide a watershed to bring an end to bad practices of the past.