29.11.2019 Author: Konstantin Asmolov

Moon Jae-in’s Next Stage of Battle Against Oligarchs

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As we continue to follow Lee Jae-yong’s case, the author would like to point out the fact that ROK President’s attempts to “get to” the oligarchs have ranged in scope. During 2019, they have had an effect on many of them, hence, it is far simpler to use names of companies rather than describe events in a chronological manner in this article.

Samsung

After the Supreme Court had ordered a review of Lee Jae-yong’s case because the value of the bribes paid to Park Geun-hye could have been underestimated by 5 billion won, a new trial against him began on 25 October 2019. We would like to remind our readers that the accused spent a year in prison and was released in February 2018 after an appellate court had cleared him of some charges due to lack of proof corroborating that the money had been paid as a bribe.

However, on 29 August, South Korea’s top court reversed this decision and ordered the appellate court to retry the case. Nowadays, the view is that the money was paid in exchange for assistance with the company succession: 3.4 billion of it was spent on the purchase of 3 horses for Park Geun-hye’s daughter, who later became a champion of Asia, and 1.4 billion was paid into a sports foundation. As a result, Lee Jae-yong, who is now serving a suspended sentence of 2.5 years, may once again be jailed, because a punishment for paying a bribe of 5+ billion won cannot be a suspended sentence. It is likely that Park Geun-hye’s prison term will also be increased.

Another case involves 5 billion won or $4.2 million (and not Park Geun-hye) that, apparently, the former President Lee Myung-bak took from the Samsung Group. South Korea’s Anti-Corruption and Civil Rights Commission (ACRC) sent evidence in support of the additional accusations of bribery against Lee Myung-bak to the special investigations unit of the Seoul Central District Prosecutors’ Office as far back as the end of May. At present, the possibility that, from 2007 to 2011, Samsung paid for Lee Myung-bak’s legal expenses via the Akin Gump Strauss Hauer & Feld law firm (based in Washington D.C) is being investigated. If relevant proof is found, then the overall sum of money accepted by former President Lee Myung-bak from Samsung will amount to a total of 11 billion won (once combined with 6.18 billion won that a court had ruled to be a bribe in October 2018).

In addition, the police raided a plastic surgery clinic in order to find out whether Lee Boo-jin, the daughter of the Chairman of Samsung Group Lee Kun-hee, had abused drugs or not. According to law enforcement, they were simply checking to see if the accusations, published by local news outlets claiming that Lee Boo-jin (the general manager and CEO of Hotel Shilla) regularly took propofol (an anesthetic agent) for non-medicinal purposes, were true or not. Lee Boo-jin denied the allegations and stated that she had been visiting the clinic to undergo lawful medical treatments. And during the raid, when the police demanded that the management of the clinic voluntarily turn over all the relevant documents, it came to light that they did not have a search warrant. The medical facility refused to comply. And the author would like to take note of the remarkable behavior of law enforcement staff who do not follow a trail of evidence in the course of an investigation, and, instead, act in support of a smear campaign initiated by tabloids.

Lotte

The Supreme Court “upheld a suspended prison sentence for Lotte Group Chairman Shin Dong-bin,” who had been convicted of “giving 7 billion won ($5.9 million) in bribes to Choi Soon-sil.” In February 2018, “a local court sentenced him to two and a half years in jail” but an appellate court handed him a suspended sentence of 30 months in October 2018. The prosecution appealed the decision, but “the Supreme Court acknowledged that the Lotte chairman gave the money to a government-linked sports foundation virtually controlled by” the confidant of the former president “in hopes of receiving business favors including a license to operate a duty free shop.” Still, the court “also accepted the assumption that” he “made the bribery decision passively for fear that refusing” “the request for the donation would negatively affect the running of the nation’s fifth-largest conglomerate.”

Along with the bribery case, Shin Dong-bin was also charged with embezzlement “after he ordered Lotte affiliates to pay money under the fake name ”wage“ to some members of his family who never worked for the companies.” However, the Supreme Court “cleared the charge, agreeing with” the argument that he simply obeyed the orders from his father, the group founder.

It was probably a lucky coincidence that, before and after this ordeal, Shin Dong-bin (who manages the business in South Korea and Japan where he has extensive ties, including his acquaintanceship with Prime Minister Shinzō Abe) has, on more than one occasion, met with Prime Minister Lee Nak-yeon in order to research means of improving the bilateral relationship between Japan and the ROK.

The leadership of Samsung, on the other hand, does not seem to be toeing the official line as readily when it comes to following orders from the government.

Kumho-Asiana Group

Its Chairman Park Sam-koo decided to take responsibility for the scandal (in relation to an audit report) and to step down from all of his roles.  Although the audit and assurance services provider Samil PricewaterhouseCoopers, which detected accounting fraud at Asiana Airlines, upgraded its opinion on the carrier’s 2018 annual report to “unqualified,” its share price still decreased by 15%. In the end, Park Sam-koo met with the Chairman and CEO of Korea Development Bank (KDB) and asked him to help restore investors’ faith in Asiana Airlines, which, according to different estimates, owes from $2,300 to 2,800 million to various financial institutions.

In April, as a result of financial difficulties, Kumho-Asiana Group decided to sell the controlling stake (of 31%), worth over $1 billion, in South Korea’s 2nd largest carrier in terms of size, i.e. Asiana Airlines. There were several potential buyers, but in the end, the financial conglomerate Credit Suisse, appointed to manage the deal, chose the consortium HDC-Mirae Asset Daewoo (which offered $2.1 billion) out of the three others as the preferred bidder. These funds may increase the company’s assets and lower its debts.

Hanjin Group

On 27 March, the 70-year old Chairman Cho Yang-ho lost his board seat at Korean Air. Cho Yang-ho (70 years of age at the time of the scandal) was appointed as the CEO of the carrier in 1999 by his father Cho Choong-hoon, the head of and the founder of Hanjin Group. It is believed that he made a significant contribution to Korean Air becoming a flag carrier. In addition, having boosted the prestige of South Korea’s airline industry globally, Cho Yang-ho served on the Board of Governors for the International Air Transport Association (IATA) In 2012, he was awarded the Mugunghwa Medal of the Order of Civil Merit for his contribution to ensuring South Korea won the bid to host the Winter Olympics in Pyeongchang.

However, only 64.1 % of participants at a shareholders’ meeting supported the reappointment of Cho Yang-ho, and he needed at least two thirds of the votes to remain the Chairman of the Board of the company. Cho Yang-ho’s record of “hurting the corporate value and rights of shareholders” was cited as the reason for the decision after he had been accused of embezzling $23.7 million of company funds.

The outcome at the meeting stemmed from the fact that the National Pension Service (NPS), one of the largest institutional investors from ROK, as well as foreign and minority shareholders chose not support Cho Yang-ho’s reappointment. The National Pension Service’s special committee also opposed reassigning Cho Yang-ho to the post of Chairman of the Board at Korean Air. A number of consulting companies voiced similar opinions.  Hence, the fact that a chairman of a conglomerate can lose his job as a result of shareholders’ votes sets a precedent in ROK’s modern economic history.

Still, Cho Yang-ho was not solely responsible for his difficulties, so were members of his family. Firstly, there was the “nut rage” incident in December 2014.  At the time, the now former Korean Air Vice-President Cho Hyun-ah (Cho Yang-ho’s oldest daughter) had a problem with the service on her flight from New York to Seoul. She ordered the chief flight attendant and a stewardess off the flight, thus “forcing it to return to the gate.”

On 16 March 2018, Cho Hyun-min, Cho Yang-ho’s younger daughter, lost her temper and “allegedly threw water at an advertising agency manager” during a meeting. However, “she was not indicted as the victim did not want to press charges.”

A few months later, Cho Yang-ho’s wife Lee Myung-hee was questioned by police “over allegations of assault against her employees” as well as drivers, which included “cursing, kicking, slapping and even throwing a pair of scissors.”

Cho Yang-ho was ousted as Chairman on 27 March, and on 8 April he died in Los Angeles.

Incidentally, Cho Hyun-ah became embroiled in another scandal in June 2019. Cho Hyun-ah’s ex-husband to be (the divorce proceedings had begun in 2018) accused her of assaulting him and their son. He provided video recordings as evidence of the abuse. The couple had “attended the same elementary school and tied the knot in 2010.” Cho Hyun-ah’s spouse worked as a doctor at the Inha International Medical Center, which was run his father-in-law. But he resigned and filed for the divorce after the scandals. According to yet another anonymous source, “the husband demanded huge alimony but was turned down,” hence he became intent “on smearing Cho’s name and hyping media attention.”

The same month, an Incheon court issued suspended prison terms to Lee Myung-hee and Cho Hyun-ah “for smuggling luxury goods” (including luxury clothes and bags), worth 88 million won, by making use of the airline’s planes. The items were disguised “as goods being brought in for the airline” or employees’ belongings. As a result, Lee Myung-hee was sentenced “to six months in prison, suspended for one year, with a fine of 700,000 won (US $590) and a forfeit of 37 million won.” Cho Hyun-ah “got a suspended sentence of eight months, with a fine of 4.8 million won and a forfeit of 63 million won.” The judge in the case stated: “The number of offenses committed and amount of smuggled goods are not small. (But) most of the smuggled goods were daily ones for self consumption, not intended to disturb the distribution order.” The repentance of the accused was also taken into account by the court.

DB

DB is the 43rd largest conglomerate in the nation with business interests ranging from steel and construction to finances. A court in Seoul approved an arrest warrant for 74-year-old Kim Jun-ki, the former Chairman of the group, over alleged sexual assaults of his personal secretary on multiple occasions between February and July of 2017.  At the beginning of 2018, “he was also accused of raping a housemaid multiple times between February 2016 and January 2017.”

Korea Financial Investment Association

On 5 November 2019, Kwon Yong-won, Chairman of the Korea Financial Investment Association, “was found dead at his home in Seoul.” The police are trying to ascertain the cause of death. In the middle of October 2019, Kwon Yong-won came “under fire after a media report revealed his use of abusive language to his former chauffeur and a subordinate.” He publicly apologized for his behavior but “refused to step down from his post, saying he would keep his term through to February 2021.” After the incident, the Korean Finance and Service Workers’ Union started to call for his resignation.

YG Entertainment

Yang Hyun-suk, the founder and former head of the corporation, was summoned by police of Gyeonggi Province and questioned for almost 14 hours. Supposedly, Yang Hyun-suk attempted to cover up an alleged illegal marijuana “purchase and use by one of the agency’s former stars, singer B.I.”, three years ago. The singer’s acquaintance, “who also took the illegal drug, was caught by police in August 2016, and she then submitted text messages to the police as evidence proving B.I. had asked her to get the marijuana for him.” However, only eight days later, the woman “changed her testimony to say she was not quite sober during the previous questioning.” Later on the acquaintance claimed that Yang Hyun-suk had “intimidated and appeased her to do so,” and had “also allegedly hired a lawyer to defend her.” In addition to the charges of intimidation, the former chief of YG Entertainment was booked for a “breach of trust as he had paid the woman’s legal fees with company funds although she did not belong to YG.”

 CJ Group

Lee Sun-ho, the “CJ Group heir-apparent and the eldest son of group Chairman Lee Jae-hyun, was freed from detention,” when “a local court gave him a three-year prison term suspended for four years after finding him guilty of drug smuggling.” The court did not even “order him to undergo probation or take an anti-drug education program.” On 1 September 2019, Lee Sun-ho “was caught at Incheon International Airport while attempting to smuggle dozens of e-cigarette cartridges filled with highly enriched liquid marijuana from the United States.” A customs screening also found that he “was carrying 167 edible marijuana products in his backpack.” Lee Sun-ho “said he had purchased them in Los Angeles where their use” is legal.

Finally, we would like to touch upon anti-corruption efforts against ministers and parliamentarians from the conservative opposition.

Lawmaker Yi Wan-young “lost his National Assembly seat after the Supreme Court upheld his bribery conviction.” More specifically, he received an interest-free loan of 248 million won (which seemingly did not need to be repaid) from a politician in 2012. The prosecution viewed the money as a bribe borrowed “under his political influence.”  As a result, the opposition lawmaker “was sentenced to an imprisonment of four months, suspended for two years,” and ordered to pay a fine of 5 million won (US$4,220).

Another representative of the opposition party Choi Kyung-hwan was given a prison term of five years. The court also ordered him to forfeit the money and “pay 150 million won in fines.” Choi Kyung-hwan was kept in detention since January 2018 because of the allegations that, in October 2014, he had accepted 100 million won in bribes (while serving as a minister) from Lee Byung-kee, the chief of the National intelligence Service (NIS). The bribe was given to “thank” Choi Kyung-hwan “for his role in raising the spy agency’s budget by 47.2 billion won when then-liberal opposition parties sought to reduce it on the grounds that the use of such funds could not be tracked.”

Former Vice Justice Minister Kim Hak-ui, 63, was arrested, “over his alleged acceptance of bribes and involvement in a sex scandal.” “The arrest came six years after the” first accusations were made against him in March 2013. “The third investigation unveiled fresh allegations of bribery and he was arrested, fueling suspicions that the two previous investigations in 2013 and 2014, which cleared him of all suspicions, were poorly conducted and probably interfered with” on orders from the Blue House. Kim Hak-ui has been “accused of receiving around 130 million won ($109,080) in kickbacks” and “sexual services over 2,100 times paid for by building contractor Yoon Jung-cheon, and of taking about 40 million won from another businessman surnamed Choi.” “Of the 130 million won, 100 million won was allegedly lent to a woman surnamed Lee,” who claimed that Kim Hak-ui and “other men raped her at a sex party at Yoon’s holiday home.”  And when Yoon Jung-cheon “demanded Lee pay back” the money in 2008, Kim Hak-ui “allegedly urged him to forgive the loan in an attempt to prevent her from disclosing the rape in return.” The contractor “allegedly did so in return for Kim’s promise to give him favors in future legal issues” and the “court recognized this as a bribe.”

The current team is planning on “investigating the prosecutors who were in charge of” Kim Hak-ui’s case in 2013 and 2014, and on continuing to probe all the existing allegations and collecting more evidence. The previous team of prosecutors is suspected of trying to “tone down the investigations following pressure from” Park Geun-hye. The investigators intend to “question those involved, particularly Kwak Sang-do, then a senior presidential secretary for civil affairs and now” an opposition lawmaker.

We understand what will happen next. Any evidence that comes to light in support of any wrongdoings committed by staff at the Blue House during the aforementioned period will be accompanied by accusations that Park Geun-hye must have known about all of this, and either helped cover up the misconduct or was a conspirator. Then the accused will agree to testify to this version of events in exchange for a reduced sentence, and the former President will get yet another prison term.

By and large, members of conservative groups have told the author on more than one occasion that at the time Park Geun-hye was President, the “accepted practice” was to force individuals to make contributions to various charity organizations, but, during Moon Jae-in’s term punishments meted out by the justice system are directly proportional to an extent any given corporation follows unofficial orders of ROK’s leadership. And if this is actually the case, we will only learn about any scandals involving huge bribes during the next President’s term. For now, we simply hope that there is indeed a fight against corruption and not in support of corruption.

Konstantin Asmolov, Ph.D, Chief Research Fellow of the Center for Korean Studies, Institute of Far Eastern Studies, Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook“.


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