Roh accepts Samsung investigation
South Korean President Roh Moo-hyun said he will appoint an independent investigator to probe bribery allegations against Samsung Group, escalating a corruption scandal that has engulfed the nation's largest industrial group.
Samsung Electronics Co led a slump in shares of group-affiliated companies after Roh said yesterday he accepted lawmakers' demand for an investigation, in a televised briefing in Seoul. Samsung Group has denied allegations by a former chief attorney that it amassed slush funds to bribe government officials and media.
The decision may make corruption a central issue in the December 19 presidential vote to select Roh's successor. Samsung Group, with about $140 billion of assets and interests spanning shipbuilding, semiconductors and mobile phones, is an icon of corporate success in an economy that's marking its longest expansion in 15 years.
The latest scandal "deals a blow to Samsung's image, as well as the country's", said Kee Ho-sam, who helps manage the equivalent of $1.6 billion at UBS Hana Asset Management Co in Seoul. "Samsung's business will inevitably be affected, but it will also contribute to improving the group's corporate transparency."
Samsung Electronics, Asia's biggest maker of chips, handsets and flat panels, fell as much as 5.9 percent and traded at 542,000 won, down 3.7 percent, at 1:46 pm in Seoul. Seven of the 10 biggest decliners on the Kospi 200 index of South Korea's largest stocks were Samsung Group units.
Presidential lobbying
The National Assembly approved a bill on last Friday authorizing an investigation into the slush-fund allegations and whether Samsung Chairman Lee Kun-hee and executives illegally helped Lee's son, Lee Jae-yong, get control of Samsung units.
"I decided to accept the demand as the bill was passed with a majority of lawmakers' support," Roh said in the briefing.
The probe will also look into the lobbying of presidential candidates during the 2002 election, when Roh beat Lee Hoi-chang, then-candidate of the Grand National Party.
Lee is running again this year as an independent for the December 19 presidential election.
Samsung Group yesterday denied new claims from former chief attorney Kim Yong-chul, who said the group diverted cash between units to amass slush funds.
Kim's allegations "are nothing more than the repetition of false, distorted and exaggerated claims", the group said in a statement yesterday. "Samsung plans to take legal actions after carefully studying false claims Kim has so far made."
Samsung stocks
Samsung Corp diverted more than 200 billion won ($215 million) in 1994 by inflating sales to an affiliate now known as Samsung SDI Co, Kim said at a press briefing on Monday. Such forged contracts between Samsung units still exist, he said.
Accounting fraud at Samsung companies, including Samsung Heavy Industries Co, Samsung Corp and Samsung Engineering Co, amounted to more than 7 trillion won as of 2000, Kim said.
Samsung Heavy, the world's second-largest shipbuilder, fell 4.8 percent to 38,900 won. Samsung SDI, the world's third-largest maker of plasma displays, dropped 6 percent to 63,200 won.
"Samsung Group shares are affected by Kim Yong-chul's statements, including the talk about faulty accounting," said Eom Giyo, who helps manage the equivalent of $3.2 billion at Woori Credit Suisse Asset Management Co in Seoul.
Separately, the country's financial regulator said yesterday it started a probe into Goodmorning Shinhan Securities Co into whether the brokerage opened accounts for Samsung officials without verifying the accounts' real owners.
Kim has claimed Samsung created bank accounts under executives' names to manage slush founds.
Four such accounts were made under Kim's name without his knowledge, holding 5 billion won in cash and stock, he said.
South Korean prosecutors banned some people related to the Samsung allegations from traveling overseas, Kim Soo-nam, a spokesman for the prosecutors' investigation, said by phone yesterday. Kim also said prosecutors started investigating accounts opened under Kim Yong-chul's name.
Bloomberg News
(China Daily 11/28/2007 page16)
