Samsung Verdict Sends a Tough New Message to South Korea Inc. – New York Times

 In Business

Now South Korea and Samsung — the country’s biggest business empire and a global force in the technology industry — are at a turning point. Friday’s verdict could embolden efforts to weaken the hold that major family-run business groups have maintained over one of the world’s most dynamic economies.

“Until now, Samsung had always been considered above the law in South Korea,” said You Jong-il, an economist at the KDI School of Public Policy and Management. “This marks a big stride in establishing judicial justice in the country because it has kept failing before Samsung.”

For Samsung, a vast conglomerate, the verdict offers a test of whether the company can wean itself from the family that founded it and has long used it to amass wealth and power. Mr. Lee and other family members could still wield power behind the scenes, say people who study South Korea’s biggest companies, the way some of the country’s other business empires have been run from jail cells.

“He still has controlling power, even though he’s in jail,” said Chang Sea-jin, a professor at the National University of Singapore, speaking of Mr. Lee. “He can fire any chief executive, and the professional managers should have to keep reporting to him.”

Mr. Lee and four other Samsung executives were convicted on Friday of paying $7.8 million in bribes and other inducements to ensure that the country’s disgraced former president, Park Geun-hye, supported a complicated corporate deal. That deal strengthened Mr. Lee’s grip on Samsung Electronics, the famous maker of smartphones and televisions and the conglomerate’s crown jewel.

Prosecutors said the bribes were paid to people and groups linked to a secret confidant of the president and included horses for the confidant’s daughter, an equestrian. Prosecutors have identified Ms. Park as one of the bribetakers. The impeached former president, who faces her own trial on related charges, has denied wrongdoing.

The verdict could still be reversed on appeal, which Mr. Lee’s lawyers have said they will pursue. Their hope is not senseless: Mr. Lee’s father, Lee Kun-hee, twice received presidential pardons for wrongdoing. But the current president, Moon Jae-in, and his political party have pledged to crack down on shady practices at South Korea’s family-run business empires, which are known as chaebols.

Photo

Supporters of Park Geun-hye, the ousted president of South Korea, calling for the release of Mr. Lee outside the courthouse in Seoul.

Credit
Kim Hong-Ji/Reuters

Like many other chaebols, Samsung was an early beneficiary of a deal struck between South Korea’s autocratic rulers and business leaders after the Korean War to work together to make the country a fast-growing, export-driven economic powerhouse. As the relationship deepened, Samsung’s political connections grew.

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