Samsung chief Lee arrested as S.Korean corruption probe deepens

http://www.reuters.com/article/us-southkorea-politics-samsung-group-idUSKBN15V2RD

402 110 9 years ago

hackuser4• 9 years ago

A serious question: Could this happen in the U.S.? Has a CEO of one of the largest companies in the nation (and world) ever been arrested? I think the odds are that someone, some time, has deserved it (though I'm not at all advocating arresting CEOs to meet a quota).

It's similar to another practice I've noticed: Other countries will arrest and imprison heads of state and other high officials, including Israel and France. It's hard to imagine that happening in the United States: Has a President or cabinet-level official ever been arrested?

In what seems like a corrupt practice to me, in the U.S. they get off with a slap on the wrist. For example, Nixon was pardoned for the sake of the nation. Why is it that other nations can handle it?

vkou• 9 years ago

It used to be possible. [1]

Jeffrey Skilling, former Enron CEO is serving 24 years.

However, there is a strong argument to be made that ever since Enron, the SEC has been defanged.

Taking a brief look at their list of accomplishments, it seems that these days, they just levy fines, instead of jailing criminals. [2][3] (Contrast the punishments for the financial crisis, vs low-level insider trading. The companies involved in the former pay fines, the people involved in the latter go to jail.)

[1] https://en.wikipedia.org/wiki/Enron_scandal

[2] https://www.sec.gov/spotlight/enf-actions-fc.shtml

[3] https://www.sec.gov/spotlight/insidertrading/cases.shtml

astrodust• 9 years ago

It's almost like they formed a commitee to ensure such a terrible thing would never happen again.

Analemma_• 9 years ago

It's not just the SEC. McDonnell v United States has basically made official corruption impossible to prosecute unless the participants are paint-drinkingly stupid in how they go about it.

pcurve7• 9 years ago

The charges against Samsung and Enron CEOs are completely different.

Former, it's bribery. Latter, some insane level of securities fraud / book cooking.

Judges would come down harder on the latter.

But it's an interesting question.

Basically this is equivalent a major U.S. company like Boeing or Disney indirectly bribing close friends of Trump to gain political favor.

greeneggs• 9 years ago

Good example, but minor correction: Skilling is serving 14 years, resentenced from the original 24 years.

https://www.justice.gov/opa/pr/former-enron-ceo-jeffrey-skil...

droopyEyelids• 9 years ago

This seems paradoxical, but I believe it's less likely in the USA becasue our companies are less "corrupt".

What I mean by that, is Samsung is so big it's like a feudal kingdom. There aren't clear lines between the government, other aspects of life, and samsung. That means any sort of power stuggle has to involve all those different aspects. The head of samsung stands in the way of ambitious people in the whole society, not just ambitious people in that company.

Compare that with the USA. If there is a power struggle in a company you don't have to attack the head person with such intensity to advance yourself. It's even possible to advance by moving to another company in the same industry.

hkmurakami2• 9 years ago

Well there's a matter of cultural differences wrt to legal enforcement too. For example in the US we tend to bring lawsuits with large fines to piraters (i.e. large scale distributors of pirated content), but in Japan they just arrest them right away.

So an arrest in one country isn't really equivalent to an arrest in another country, because what that arrest actually means can be quite different.

ksherlock• 9 years ago

The article only mentions bribery (and other unspecified corruption). In the US, we call it a campaign donation (or free speech) and it's hard to prosecute.

That said, it does happen - Ted Stevens (Alaska Senator) and Bob McDonnell (Virgina Governor) were convicted of corruption only to see it overturned. And pretty much every governor of Illinois ends up in prison.

danielvf• 9 years ago

The mayor of Charlotte, NC went to prison for bribery after accepting a suitcase full of cash from the FBI.

refurb• 9 years ago

There are quite a few CEOs who have gone to prison in the US[1]. The Tyco scandal was a big one.

[1]http://www.huffingtonpost.com/2012/05/18/top-10-ceos-sent-to...

omegaworks• 9 years ago

There have been a series of pardons that probably should never have happened:

https://en.wikipedia.org/wiki/Pardon_of_Richard_Nixon

https://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair

The Iran Contra people probably helped initiate our present quagmire in the Middle East during Bush II's term:

Elliott Abrams served as served as Special Assistant to the President and Senior Director on the National Security Council for Near East and North African Affairs and then Deputy National Security Advisor for Global Democracy Strategy during Bush II's term.

John Marlan Poindexter got a job on Bush II's DARPA.

Duane Clarridge got involved as Ben Carson's foreign policy advisor during his presidential run. So these people are still tied to the White House to this day.

matt40772• 9 years ago

IT's a tight rope to walk, but there's a system to the madness in regards to presidents: if you punish them to the degree that (parts of) the public demand, you'll almost certainly make it a losing proposition for any of them to ever resign.

African countries have traditionally been very good at demonstrating this, unfortunately. Almost any leader of government south of the Sahel and north of South Africa from independence to about 10 years ago could have been thrown into a dark abyss without second thought and even Amnesty International would have just muttered a "Wait, they deserve a fair tr.. oh! never mind!".

But because that actually was happened more often than not, each one of them clung to power for as long as possible – which in some cases was (and is!) surprisingly long: Mugabe is at it since 1987.

In many cases, these dictators actually started out somewhat promising. Mugabe, for example, came to power against a backdrop or actual injustices, which he actually did something about (although what he did resulted in disaster). But spend enough years with absolute power, surrounded by yes-men, but constantly fearing the yes-I-have-knife-man and it starts to do strange things to your psyche.

It's not the only mechanism – there are enough examples in other countries of politicians overstaying their welcome. And it doesn't quite apply as neatly to anyone but the very top. But it's part of it.

Which is why it was so encouraging to see how the crisis in The Gambia was solved a month ago. You didn't even hear about it? Well, a decade earlier, you wouldn't have heard the end of the bloody war currently ravaging the west African country of... Part of the solution was guaranteed protection for the outgoing guy (+family and his mysteriously large wealth).

kobeya4• 9 years ago

You can blame the press for the pardon of Nixon. President Ford said that he was going to let justice play out, except that his press briefings got swamped by questions about Nixon. He pardoned Nixon so that he could kill the topic and focus on his agenda.

Shivetya2• 9 years ago

I will disagree with the idea of not pardoning Richard Nixon. Ford really had no choice. He got shoved into the VP spot because both parties liked him (92-3 confirmation, first time the 25th Amendment was used).

Nixon was already shamed but it would have served the country no good to have it go further and be dragged out for years and become a distracting spectacle. Plus his reasoning was sound, a pardon is a presumption of guilt and acceptance of it. In a way President Obama gifted Chelsea Manning by only commuting her sentence. The use of pardons and commutations has all sorts of hidden meanings

wu-ikkyu• 9 years ago

See also[1].

the Senate committee decided early on not to pursue the President, not only because he was too old and lacked the mental ability to fully understand what happened, and had too little time left in office, but because the Senators "honestly thought that the country didn't need another Watergate. They were urgently hoping to avoid a crisis.

[1]https://en.wikipedia.org/wiki/Congressional_committees_inves...

equalarrow3• 9 years ago

Look no further than the Bush's, their connections to the Saudi's, Carlyle group and many others.

The short answer is: for conviction, no.

We'll see with Trump since he cares about hiding these connections even less than Bush did. He would probably even say they make America more winning.

matt40772• 9 years ago

This may come as a surprising, but the US is actually pretty far ahead in terms of the fight against corruption.

For example, until just a few years ago, many countries (Germany being the one I know specifically) allowed corporations to deducted bribes paid abroad from their taxes. That was changed only under pressure from the US.

There's a lot to complain about regarding the willingness of US courts to assume jurisdiction, the willingness of the US government to dictate international norms etc. But it seems that in this regard, it worked out well because the US legal system was always going to be ahead of /some/ competitors, so it became advantageous for US corporations (and, by extension, the government) to root out corruption: it was the one game they had no chance of winning.

One recent example is VW, and another recent development may be a strengthening of similar mechanisms in the EU, which may in due course be very helpful, even for the US.

It seems that nowadays the problem in the US isn't vast conspiracies where bags of money are secretly handed to politicians. It's that there's so much activity that in any other country of similar level of development, or any other time in the US, would have been regarded as a major corruption – but is now somehow regarded as not just completely legal but also morally sound.

I mean: there are (many) companies who give to both presidential candidates each election. There is simply no logical reason to do that except the expectation of getting access. (For donations to parties, I could at least imagine some argument about how donations allow them to do meaningful work on the local level etc. Can't say the same about the presidential level).

daodedickinson2• 9 years ago

Looking at Hillary, no it can't happen in the US because there are so many ways to not make it worth the while of whoever would have to do it. Maybe the population density of Seoul is relevant; I'm not sure...

sengork• 9 years ago

I wonder what impact (if any) this will have to Samsung's vast customer base. Somehow I think there would be contingency plans in place from risk management perspective.

Samsung is a large competitor in many industries and that on its own benefits even those who are not their customers.

pzone• 9 years ago

In the long run it could hopefully be a good thing, if better corporate governance results in Samsung improving its operations and becoming even more innovative.

resonanttoe• 9 years ago

I don't pretend to know the inner workings of South Korea's political turmoil right now.

But hasn't it long been held/believed that Samsung has had a rather dominant political position from behind the scenes in South Korea?

hkmurakami2• 9 years ago

Yes. My college roommate (from Korea) once told me that Samsung is "above the government", when I asked him whether Samsung influences the government.

But naturally they must have enemies within the system. And as a country modernizes, it becomes harder and harder to maintain that tight control. So perhaps the enemies are striking as hard as they can to dethrone Samsung. One consideration is whether the enemies are also Cheabols though.

sleepingeights• 9 years ago

There's a lot of external influence on the Korean government. A significant amount of Samsung shares are foreign held. The larger foreign investors are concerned about the structure of these Korean giants based on familial ties and want Samsung to break apart ownership.

The Koreans are a weaker country heavily reliant on the presence of the US' external peace keeping force to deter aggression from their neighbors. There's a significant amount of pressure even by US firms for Samsung to abandon their primitive tribal familial structures within their corporations.

yongjik3• 9 years ago

The relationship among different Chaebol families is less like different Mafia factions, and more like different Wall Street bankers. They may compete in the market, but they're all in the same boat, and they have a vested shared interest in keeping themselves largely out of the law's reach.

Moreover, virtually all of them are connected to each other (and to most powerful politicians) via marriages. In a sense, they are one big (corrupt and powerful) family.

z0d• 9 years ago

With the tight knit control over the full conglomerate Samsung gained to acquire the pinnacle of success on these corrupt deeds done which seem to be drastic to even those who are working, since time changes and people also change. This is a huge blow to SK and Samsung no matter how we dissect it.

They should get their control back and try to explore better paths to success with the same zeal else the catastrophic foreign pressure (who I also think is the reason behind this) might cause Implosion in the SK-Samsung or chaebols. Japan has this Enterprise Keidanren for damage control over this recent Toshiba's scandal causing a spiral downfall.

Also most countries split opinions based off the younger vs old generations cause tiny fractures which in some cases lead to devastating losses..

lowpro• 9 years ago

I'm currently doing research with students from South Korea, this surprised no one. They actually have a saying about "Keeping in touch with a cousin's cousin if they work at Samsung." In SK you're considered well off/rich if you or any family works there because it's the main tech business. After Choi Soon-sil the government is seen as corrupt through and through, in glad they're doing something about it, as most of the population (95%) disapprove.

rebootthesystem2• 9 years ago

I had a business conflict with Samsung about a decade back. In the end, it cost us nearly a million dollars and probably many times more than that in opportunity cost.

I found them to be extremely dishonest and, by reason of sheer size, very aware of the fact that they are able to virtually exist above the law. What I mean by that is that they have no problem whatsoever throwing their weight and money around to cause so much damage that you'd rather take the abuse and the loss instead of fighting them.

In our case, they had one of their top three US executives blatantly lie in court. I could not believe it. This guy repeatedly lied under oath and his attorney (a Samsung attorney) did the same.

Could we have won? Absolutely. It would have required a million dollars cash (on top of the damage they caused my business) and probably two years of being buried under an intense legal campaign designed to cause damage at every possible turn.

Here's an example of what they did: They filed for a broad TRO (temporary restraining order) to keep us from talking to any of their competitors at a time when they breached a contract and discontinued components we designed into a line of products over a period of about ten months of work. Components the top Samsung executives in the US helped select and vouch for.

The TRO covered getting within a certain radius of a trade show attended by Samsung as well as every single one of their competitors. The radius was such that we couldn't even park a car within walking distance of the convention center, much less come in and go talk to alternative component sources. A few weeks later the judge who oversaw the TRO chewed-out the Samsung attorney for resorting to such a nasty destructive approach. Still, the damage was done. You'd have to fly all over Asia to see the people we could have seen in a couple of days at the conference.

So, yeah, I've seen one side of this beast and it's nasty. Nearly killed my manufacturing company. I don't generally think of large corporations as evil but in this case I could be convinced to make an exception.

b1gtuna2• 9 years ago

It sucks that it happened to you, but Samsung turning back on its partners is a known tactic in SK. The sad part is Samsung is probably not the worst of the bunch in that country.

jacobolus• 9 years ago

My uncle was a lawyer on the other side of a legal dispute involving Daewoo in the 1990s. All the Korean chaebols operate similarly. (He’s a badass and bopped them in court though.)

cookiecaper• 9 years ago

Every multinational behaves this way in court. Their lawyers have zero compunction pushing these blatantly farcical narratives about how badly the company is damaged by the most minor alleged infractions, asking for the moon and the stars, and judges actually granting it. "Big companies bully" is a truism of corporate law; in fact, for many, this bullying plays a large role in their ability to hang on to their power.

Small innovators are the victims of this country's convoluted civil law system many times each day. I 100% believe that we are decades behind in technological progress because of the perverse combination of corporate shills in Congress, massively pro-corporate media preventing salient discussion on these points from entering the public dialogue (preferring instead to inflame people on identity politics or intractable social issues), and a lot of judges with a strong bias to believe anything a recognizable entity says when it's competing against a less-recognizable entity.

SiVal• 9 years ago

Back in the '80s, when Korea was still a military dictatorship and Samsung was still run by its original founder, one of the founder's sons was recruiting me for some unusual (non-criminal) skills I had. He made it clear to his staff that he wanted me as one of his guys for special projects, and the way the somewhat militaristic Samsung guys kowtowed to me was truly creepy, even for dictatorship-era Korea. I was well aware that it wasn't about me but entirely about the founder's son. I was a pure symbol, inspiring fear and with no intrinsic value of my own whatsoever.

The founder died as this was happening, and I was quickly warned by some decent insiders that I should cease all contact with my benefactor and get away ASAP. The sons of the founder were going to fight for power and, as the Koreans say, "when whales fight, the shrimp's back gets broken". In a clash between the most powerful men in a military dictatorship, little people could have tragic "accidents", and so what? I took their advice.

The same family controls that company today. The guy just arrested is the nephew of my old "benefactor". The country is no longer a dictatorship, but the powerful people at the top haven't necessarily changed their ways. Every few years, there are accusations that the top Samsung people are guilty of bribery or similar manipulations. Hard to believe, right? They'll get charged, then the charges are dropped. They'll be convicted, then pardoned by the President. These are power struggles by people who are all above the law but not necessarily above one another. If you do business with them at the small, overseas, trivial level, this may not matter, but you should be aware that behind them you have a system that plays by older rules.

yongjik3• 9 years ago

Who would have thought that buying horses for president's best friend's daughter[1] would be Samsung's ruler's undoing...

(Wow, that's a lot of "'s"'s...)

[1] For those who don't follow South Korean news closely: https://en.wikipedia.org/wiki/Chung_Yoo-ra

She's currently in a jail in Denmark, fighting extradition requested by Korean prosecutors. In addition to tripping Lee, she also got multiple professors in Ewha Womans University arrested for corruption. (Yay?)

ithought• 9 years ago

To be fair, her dad was an infamous "shaman-esque pseudo-Christian cult leader" who was the mentor to the former President and used his friendship to solicit bribes.

And her and her mother are accused of laundering $1 billion. At only 20 years old, it'd be fascinating to hear her philosophy/perception of business and life.

yongjik3• 9 years ago

Well, we kind of know Chung's philosophy on business and life. A 2014 Facebook posting of hers was "discovered" after she got infamous, and it was a goldmine:

능력없으면 니네부몰원망해 (...) 돈도 실력이야

(If you aren't capable, resent your parents. Money is ability.)

On one hand, it's a bit unfair to dig FB postings of clueless youngsters. On the other hand... wow.

sooheon3• 9 years ago

Really nothing fascinating to it. Very generic privileged and spoiled child (as my sibling poster pointed out), and none too bright. Look at the sheer amount of extra-legal maneuvering by the mother to get her into a decent college.

q-base• 9 years ago

Not directly relating to her - but the book "Thich face, Black heart" comes to mind when thinking of "hard"/ruthless business/life philosophies from the Asian region. Depending on how you interpret the advice of course.

fersho311• 9 years ago

It just dawned on me that the president of South Korea is female. Its even more surprising when you realize that most korean families think very conservatively when it comes to the female role in a family household.

b1gtuna2• 9 years ago

Also SK tried to impeach the president twice in the last decade. That's like two more than the US. In some ways it's a very democratic nation.

shanmdphd• 9 years ago

The first impeachment was not actually approved. It would be really historical if this second one is approved presumably happening in March.

peterjlee• 9 years ago

She's also a daughter of the former president(dictator) who modernized South Korea. Her father was the main reason why people either voted or didn't vote for her. When she was elected it came as a shock to most liberal people just like when Trump won.

nonbel• 9 years ago

"She's also a daughter of the former president"

Interesting, in the US we had two Bushes and recently narrowly avoided a second Clinton. In Canada they are on their second Trudeau. How many other republics/democracies is this happening to?

"came as a shock to most liberal people"

The dynasty thing seems to cross political lines in North America.

lostlogin• 9 years ago

think very conservatively when it comes to the female role in a family household.

I think that 'regressive' is a better word for that type of gender stereotyping.

pcurve7• 9 years ago

This is basically payback time for Korean people. Lee is partly paying for sins of his father and grandfather.

In the 60s, his grandfather got slapped on the wrist for major tax evasion charges.

In 2000s, his father basically got off scot-free for tax evasion and having $4 billion in political slush fund.

And just like his Dad and Grandfather, he also 'almost' got away with bribery charge, when presiding judge unexpectedly kibosh-ed the case a few weeks ago, much to chagrin of special prosecutors that brought charges against him.

National wide outrage ensued, and then the appeal followed. Now he is in the slammer awaiting trial.

People are so pissed off, even if his hands were completely clean, they may have to put him away. (figure of speech)

JumpCrisscross• 9 years ago

Are Korea's other families similarly vulnerable?

pcurve7• 9 years ago

I would say so.

I know someone who does private Pilates training at homes of ultra rich families in Seoul.

Because of the fall outs from this scandal, she is saying that all her clients are cutting activities and laying low.

Older generation of Koreans in general have more lax attitudes about political abuses by the wealthy families because they also indirectly benefited from the cozy conglomerate & government relationships, and saw Korean rise from abject poverty.

No so with the younger generations born after the 60s. They've basically had it with the current soul-crushing system, and are desperately hoping for radical reform. And in doing so, they're willing to watch their world burn.

dmix• 9 years ago

What is being done to prevent future Chaebol [1] from having state-anointed corporate protection? I hope this isn't theatrical punishment while the problem of persists.

[1] https://en.wikipedia.org/wiki/Chaebol

joecool1029• 9 years ago

Will he be pardoned for the third time and by the third different president?

(probably)

LandoCalrissian• 9 years ago

I don't actually know much about South Korea. Could you provide more context here?

pcurve7• 9 years ago

Probably in reference to his grandfather and father basically getting away with not serving jail time for their corrupt dealing associated with former presidents of Korea. President Roh Tae Woo and Park Jung Hee (father of the current president)

known• 9 years ago

His family was running a Pyramid scheme with tacit support of Administration

fiatjaf3• 9 years ago

Where there is big government there is big corruption.

realusername2• 9 years ago

The issue is in this case big companies, not big governments.

fiatjaf3• 9 years ago

Really? No government involved?

brilliantcode• 9 years ago

This is merely a symbolic gesture. People are pissed off. They want to see blood. CEO of Samsung is an easy target.

In reality, he'll be out once the whole situation simmers down and people forget.

This has how it has always worked. Chaebol CEOs are untouchable and they are fully aware of their position in society and abuse it to maximize their interests.

I'm not even remotely surprised by the anecdotal experiences of dealing with Samsung. Don't forget about SNES cartridges that used to be sold in Korea.

Samsung chief Lee arrested as S.Korean corruption probe deepens

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