S.Korean prosecutors on the hunt for Samsung heir

By AFP/Jung Ha-Won January 16, 2017 | 12:51 am PT

The Samsung heir is accused of spending corporate funds on under-the-table deals.

South Korean prosecutors on Monday sought the arrest of the heir to giant conglomerate Samsung for bribery in connection with a political scandal that has seen President Park Geun-Hye impeached.

Samsung, the world's largest smartphone maker, is already reeling from the international debacle over its Galaxy Note 7, which was recalled after some devices caught fire.

In a statement, prosecutors investigating the political scandal said they asked a Seoul court to issue an arrest warrant for Lee Jae-Yong, the son of the Samsung group chairman Lee Kun-Hee.

Samsung -- the South's biggest business group by revenue, which is equivalent to a fifth of the country's GDP -- has dozens of units including flagship Samsung Electronics.

Lee's arrest could have an "important" impact on the South Korean economy, a spokesman for the prosecutors acknowledged. "But we believe that achieving justice is more important," he told reporters.

The scandal centers on Park's secret confidante Choi Soon-Sil, who is accused of using her ties with the president to coerce top local firms into "donating" nearly $70 million to dubious non-profit foundations which Choi then used as her personal ATMs, in exchange for political favors.

Samsung is the single biggest contributor to the foundations and separately paid Choi millions of euros, allegedly to bankroll her daughter's equestrian training in Germany.

Lee, 48, is the vice chairman of Samsung Electronics and is accused of approving decisions to pay Choi large sums of money in a bid to win political favours.

Samsung's bribes totaled 43 billion won ($36.4 million), the prosecution spokesman said, adding Lee was also accused of embezzlement for spending corporate funds for bribery.

In addition, he faces charges of perjury after he told a parliamentary hearing that he did not seek any preferential treatment in return for donations.

The Seoul Central District Court said it would rule on the prosecutors' request on Wednesday. If it approves the move, Lee -- who was questioned by prosecutors for a marathon 22-hour session last week -- will be the first senior executive arrested in connection with the scandal.

In a statement Samsung said the prosecutors' decision to seek his arrest was "hard to understand".

"There was no support that sought something in return," it said. "We believe that a court will make a good judgment on this."

'Personal matters'

Prosecutors are in particular probing whether Samsung's donations and payment to Choi were aimed at securing government approval for a controversial deal it sought in 2015.

The merger of two Samsung units, textile manufacturer Cheil Industries and construction arm Samsung C&T, was seen as a key step towards ensuring a smooth third-generation power transfer to Lee.

The deal was opposed by many investors who said it willfully undervalued Samsung C&T's shares. But the National Pension Service, a major Samsung shareholder, approved the transaction, which eventually went through.

A former welfare minister, Moon Hyung-Pyo, who oversaw the operations of the pension fund at the time, was formally charged Monday with abuse of power for pressuring its managers to approve the merger.

Park, accused of colluding with Choi to extract money from the firms and letting the friend meddle in a wide range of state affairs, was impeached by parliament last month.

South Korea's constitutional court is deciding whether to uphold the impeachment. If it does, Park will immediately lose her executive immunity from prosecution and an election to pick her successor will be held within 60 days.

Both women have denied any wrongdoing.

Choi, who is currently on trial for coercion and abuse of power, appeared at the Constitutional Court proceedings for the first time on Monday.

She admitted visiting the presidential Blue House several times to help Park handle "personal matters" and had shared an e-mail account with a senior presidential aide to edit some of Park's official speeches. But she denied seeking any financial favours using her presidential connections.

> Samsung Vietnam reports massive loss following Galaxy Note 7 scandal

> Samsung Galaxy Note 7 owners in Vietnam told to give up their phones