April 17, 2008 / 5:34 AM / 11 years ago

Samsung boss indicted for tax evasion

SEOUL (Reuters) - Samsung Group Chairman Lee Kun-hee was indicted on charges of tax evasion and breach of trust on Thursday, but was cleared of a more serious bribery charge after a probe into South Korea’s biggest business group.

Cho Joon-woong, a special prosecutor investigating alleged corruption at the Samsung Group, announces the investigation results during a news conference at the office of a special counsel in Seoul, April 17, 2008. REUTERS/Jo Yong-Hak

Investors, relieved the four-month investigation had ended, said it may help bring transparency to the murky management structure at Samsung, bringing it closer to global standards.

The investigation was launched in January after a former top legal executive at the group accused some of its top management of hiding money and keeping a slush fund of more than $200 million to bribe politicians, prosecutors and officials.

A special prosecutor indicted nine other senior Samsung executives, but said Lee and the others would not be arrested.

“The criminal acts subject to indictment today constituted grave crimes because the amount of tax evaded and profits taken by violation of duties were astronomical figures,” the prosecutor said in its findings.

Lee, 66, could face from five years to life in prison but analysts say he would likely escape prolonged jail time because judges have often been lenient towards corporate leaders convicted of wrongdoing, saying jailing them could hurt South Korea’s economy.


While the prosecutor cleared Samsung of the bribery allegations, he said group officials conspired to hide 4.5 trillion won ($4.55 billion) in Lee’s assets and worked secretly to transfer wealth to Lee’s children.

In a statement, Samsung apologized “for causing concerns.”

“Taking this special prosecution investigation as a new starting point, Samsung is preparing reform plans, based on advice from various sectors of our society,” it said, adding it would make an announcement on details next week.

Shares in flagship Samsung companies retained strength after the indictments and analysts say the results of the probe may prompt the group to be more open. Samsung Electronics which delayed release of its quarterly earning due to the probe, was up 1.54 percent to 661,000 won by 0700 GMT, leading the wider market’s 0.57 percent gain.

Kim Gee-soo an analyst at Goodmorning Shinhan securities noted the foreign stake in the Samsung Electronics, South Korea’s biggest company and the group’s flagship firm, had fallen due to a lack of transparency and questions of corporate governance.

“The indictment is meaningful in that this may motivate the Samsung Group to become more transparent before the eyes of the investors,” he said.

Critics noted few changes over the years at the family-run conglomerates known as “chaebol,” despite a number of high-profile convictions of their leaders.

Lee, who was questioned twice this month, said last week he took moral and legal responsibility for the case and would look into reforming management practices at the group.

The country’s chaebol, which powered South Korea from the ashes of the 1950-53 Korean War to become Asia’s fourth-largest economy, have been accused for years of having opaque management. Some of their leaders have been convicted of white-collar crime, but have avoided long jail sentences.

Last week, the Supreme Court overturned a high court’s suspended jail term for Hyundai Motor Group Chairman Chung Mong-koo, which could lead to a review of his sentence for fraud and embezzlement.

Chung, who heads the world’s sixth largest car manufacturing group, spent at brief spell behind bars, but then got a suspended sentence because the judge said his role in South Korea’s economy was too important for him to be taken away from his job.

Additional reporting by Jack Kim, Park Ju-min, Park Jung-youn, Lee Jiyeon and Marie-France Han, editing by Jonathan Thatcher and Bill Tarrant

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