Will Samsung Case Mark A Turning Point For South Korean Business Ties To Government? | KERA News

Will Samsung Case Mark A Turning Point For South Korean Business Ties To Government?

Aug 25, 2017
Originally published on August 25, 2017 9:47 pm

A South Korean court's decision Friday to sentence Lee Jae-yong, the de facto leader of Samsung, to five years in prison on corruption charges is reverberating across the country. The nation's economy and Samsung's fortunes have been inextricably linked for decades. Now both face questions about what they'll look like going forward.

Lee, also known as Jay Y. Lee, stood silently as he learned his fate inside a Seoul courtroom. Outside, nationalist supporters of Lee — and ousted former President Park Geun-hye — didn't hold back, screaming that the judge and prosecutors should release him.

Choi Tae-son was one of the demonstrators angry with the guilty verdict.

"Guilty means if he's guilty, then she's guilty," Choi said.

"She" in this case refers to the former president, who is standing trial on her own charges of criminal bribery and abuse of power. Park was impeached and removed from office in the spring, in a sprawling public corruption scandal linked to Lee.

The court convicted Lee on charges that Samsung paid millions in bribes to slush funds intended for Park, all in exchange for government approval for a controversial merger. It helped cement family rule of company: Lee is the son of Samsung Group chairman Lee Kun-hee, and grandson of the founder, Lee Byung-chul.

"That is the reason he is well-known and his importance in Korean society is so big," says Seoul National University economist Park Sangin.

Lee maintains his innocence, and his attorneys say he will appeal. It's unclear who will lead Samsung if he is in prison. The question matters because the company has played such a key role in the nation's emergence as an economic powerhouse. South Korea is even referred to sometimes as the "Republic of Samsung."

The Samsung conglomerate, known globally for its electronics and smartphones, is South Korea's biggest and touches almost every aspect of South Korean life. Samsung encompasses more than 50 affiliates involved in life insurance, shipping, cars, construction, hospitals, hotels — even seeing-eye dogs.

"You can live your entire life here, from cradle to the grave, on Samsung products. So you can die, go to the Samsung morgue when you're dead, get married at the Samsung wedding hall in the company," says author Geoffrey Cain, who has written a forthcoming book on the company.

Economist Park believes Lee's conviction will have serious symbolic meaning in South Korea.

"This is the kind of the moment we have to change, fundamentally, for us to go further," he says.

As the country's leading chaebol — the Korean term for family-run super-conglomerates — Samsung is inextricably tied to state power centers. But after this giant scandal, Koreans are asking: Should chaebol be so centrally powerful, aligned with the government and led by dynasties?

"There will be more argument and more momentum built up for the reform of Korean chaebol," economist Park says.

The new South Korean president, Moon Jae-in, seems to agree.

After the verdict, his press secretary, Yoon Young-chan, said in a statement: "I hope this is a starting point to cutting off businesses' close relationship to the government that has held our society back from going forward."

Jihye Lee contributed to this story.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

ROBERT SIEGEL, HOST:

A South Korean court has sentenced the de facto leader of Samsung to five years in prison on corruption charges. It's part of a bribery scandal that brought down the president of South Korea this spring. As NPR's Elise Hu reports, what happens now could affect the direction of the country.

ELISE HU, BYLINE: Samsung's leader, Jae Y. Lee, stood silently when he learned his fate inside a Seoul courtroom. Outside, his supporters didn't hold back.

UNIDENTIFIED WOMAN: (Shouting in Korean).

HU: Eight-hundred riot police surrounded the courthouse to help control the crowds of demonstrators angry with the guilty verdict. Choi Tae-son was one of them.

CHOI TAE-SON: The guilty means if he's guilty, then she's guilty.

HU: She is ousted President Park Geun-hye, who lost her job in a sprawling public corruption scandal linked to Lee. The court today convicted Lee on charges that Samsung paid millions in bribes to slush funds for President Park all in exchange for government approval for a controversial merger. It helped cement family rule of the company, as Lee is the son of the chairman and grandson of the founder.

PARK SANGIN: That is the reason he's well-known and his importance in Korean society is so big.

HU: Seoul National University economist Park Sangin says this conviction will have serious symbolic meaning in South Korea.

PARK: This is kind of the moment we have to change fundamentally for us to go further.

HU: Lee maintains his innocence, and his attorneys say he will appeal. But who leads Samsung matters because the company played such a key role in the nation's emergence as an economic powerhouse. Today, South Korea is called the Republic of Samsung for a reason. The company is known globally for its electronics and smartphones.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MAN: The phone that defined big just got bigger.

HU: In Korea, the Samsung conglomerate is biggest. It encompasses more than 50 affiliates involved in life insurance, shipping, cars, construction, hospitals, hotels and even seeing-eye dogs. Author Geoffrey Cain, who wrote a forthcoming book on Samsung, put it this way.

GEOFFREY CAIN: You can live your entire life here from cradle to the grave on Samsung products. So you can, you know, go to the Samsung morgue when you're dead. You can get married at the Samsung wedding hall in the company.

HU: As the country's leading chaebol, the Korean term for family-run superconglomerate, Samsung found itself inextricably tied to state power centers. After this giant scandal, Koreans are asking, should chaebol be so centrally powerful, aligned with government and led by dynasties? The economist Park...

PARK: There will be more argument and more momentum built up for the reform of Korean chaebol.

HU: The new South Korean president seems to agree. His spokesman said after the verdict, I hope this is a starting point to cutting off businesses' close relationship to the government that has held our society back from going forward. Elise Hu, NPR News, Seoul. Transcript provided by NPR, Copyright NPR.