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Bribery scandal at Samsung paves way for chaebol reform

Activists call for prosecutors to arrest heir-apparent of the IT giant

SEOUL -- The corruption scandal that has engulfed Samsung Group is setting the scene for regulators to reform the commercial sector to strengthen checks and balances on powerful family-run conglomerates and to ensure that the voices of minority shareholders are heard, analysts and politicians said Thursday.

Samsung Electronics Vice Chairman Lee Jae-yong, the group's de facto leader, was quizzed Thursday by prosecutors about the company's 20.4 billion won ($17.3 million) donation in 2015 to two foundations controlled by Choi Soon-sil, allegedly so that she would influence her longtime friend, President Park Geun-hye, to make decisions in favor of the group.

The heir apparent of the group was also questioned about Samsung Electronics' 2.8 million euro ($2.98 million) contract with a sports consulting company in Germany owned by Choi in the same year.

Analysts say that the scandal shows that there are no robust regulations governing the country's political and economic systems to prevent such activity. "It seems like they are two fast trains with no brakes," said Park Ju-gun, president of CEO Score, a corporate information provider, referring to President Park and Samsung's Lee.

"The scandal gives us a good chance to reform chaebol [or family-controlled conglomerated] to have a more transparent and open system. To revise commercial law to reflect more voices from minor shareholders and strengthen outside board directors are some examples."

Park says that such issues will come to the fore in the presidential elections that could take place as soon as March if the Constitutional Court upholds parliament's impeachment of Park.

On Thursday, Samsung's Lee apologized to media. "I am sorry for not showing good characteristics to people," Lee said to reporters before appearing at the special prosecutors' office in southern Seoul.

Investigators believe that the donations were made to Choi so that she would help secure support from the National Pension Service for a merger of two of Samsung's affiliates in 2015, a deal that was strongly opposed by minority shareholders. The NPS subsequently voted for the merger of Samsung C&T and Cheil Industries.

The Special Prosecutors' Office did not rule out the possibility that it would seek an arrest warrant for Lee, and charge him with bribery, perjury, embezzlement and breach of trust. Lee had denied such allegations at a parliamentary hearing in December.

Earlier this week, Moon Jae-in of the main opposition Democratic Party of Korea, a front-runner in the presidential race, vowed to eradicate power abuse by chaebol.

Ban Ki-moon, former United Nations secretary-general who is expected to run against Moon, is also seen announcing measures to reform family-run conglomerates. Ban returned to South Korea on Thursday, ending 10 years' of service in the organization in New York.

Activists urged special prosecutors to arrest Lee, saying that he was guilty of robbing the public pension without regard for minority shareholders' interests.

"We demand that Special Prosecutor Park Young-soo arrests suspect Lee Jae-yong, to ring an alarm bell to highlight the wrongdoings of chaebol," said People's Solidarity for Participatory Democracy, an activist group in Seoul, in a statement.

"To punish serious crimes committed by a chaebol chief is the fastest way leading to normal corporate management. This is the responsibility of Special Prosecutor Park Yong-soo which the people gave him."

But shares in Samsung Electronics hit a fresh record high of 1,940,000 won on Thursday, up 1.36% from the previous close. The largest chip in the Korea Exchange rose for five consecutive days after the company announced a surprisingly upbeat earning guideline for the fourth quarter. 

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