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Samsung Electronics Vice Chairman Lee Jae-yong gives a public apology regarding the scandal surrounding his management succession at Samsung’s Seoul headquarters on May 6. (photo pool)

“Articles supporting the merger, including columns ghost-written by prominent figures, were published to manipulate investors’ decisions.”

This striking line appeared in the press release put out by prosecutors on Sept. 1, when they indicted Samsung Electronics Vice Chairman Lee Jae-yong for illegalities connected with the merger of Samsung C&T and Cheil Industries. The newspaper scheme was hatched after investors objected to the unfair merger ratio chosen by Samsung when it announced its merger plans in May 2015.

Rumors to that effect had been circulating at the time, but I’d been pretty skeptical of them. If true, this is truly shocking, since it would mean that Koreans were deceived by the very people they trusted to have good judgment and integrity.

On June 23, the Dong-a Ilbo, one of Korea’s top three conservative newspapers, published an interview with Noh Dae-lae, former chair of the Korea Free Trade Commission (KFTC), titled “Hedge funds aim to exploit management vulnerabilities exposed by efforts to fix cross shareholding.” Prosecutors believe that Noh’s remarks in the interview were based on a column written by Samsung. Two months before the interview, Noh was appointed as a chair professor at Sungkyunkwan University, a university whose foundation is operated by Samsung. And on June 14, Hwang Young-key, head of the Korea Financial Investment Association, warned in an interview that “the world’s vulture funds will pounce on Korea if the merger is blocked.” Hwang used to work for Samsung.

Were these newspapers unaware that Samsung stood behind these two individuals? It’s likely that they knew, and were catering to the needs of Samsung, their number one advertiser. This isn’t simply speculation; evidence of that came to light during the Samsung bribery trial, when the prosecutors produced a text message sent by Lee Seung-cheol, former vice chairman of the Federation of Korean Industries, to Chang Choong-ki, former deputy chief of Samsung’s now-defunct Future Strategy Office (FSO). The text message said, “We’re planning to keep talking about improving the right to defend [management] in feature articles, starting with the Dong-a [Ilbo].”

Five years have passed, but nothing has changed. The conservative press is united in its attacks on the prosecutors in articles such as “Lee Jae-yong indicted, disregarding recommendation by investigation review board.” These articles parrot the Samsung legal team’s criticism of the prosecutors. Some of these articles are almost ludicrous, such as “Lee Jae-yong ultimately indicted again; the unending investigations and trials of one businessman” and “Samsung caught up in ‘judicial risk’ once again.”

The conservative press studiously ignores the Supreme Court’s ruling that the FSO played a leading role in the merger, which was aimed at helping Lee Jae-yong inherit control of the Samsung Group, and that a bribe was given to former President Park Geun-hye. A raid by the prosecutors turned up a wealth of internal documents backing up the charges. But these newspapers misrepresent the Samsung crisis as being a matter of “judicial risk,” when at its core, the risk is presented by Lee Jae-yong and his illegal campaign to inherit control of the group. That’s not what the press ought to be doing.

Nobody would deny that Samsung is South Korea’s leading company. Samsung’s de facto chairman has been indicted twice in four years, which is a shame both to Samsung and to the South Korean nation. There’s little parallel for this among advanced economies. This is Korean society’s punishment for condoning and indulging the illegalities in Samsung’s scheme to help Lee inherit management rights over the group over the past 20 years. It’s not merely an issue of a few prominent figures and newspapers. The prosecutors and courts also share much of the blame for undermining the rule of law.

Samsung’s succession scheme goes back to the mid-1990s. That was when Lee Jae-yong began laying the groundwork for the succession by buying up cheap stock in group affiliates with money from his father, Samsung Group Chairman Lee Kun-hee. Some of the younger Lee’s key acquisitions were convertible bonds at Samsung Everland and bonds with warrant at Samsung SDS, all sold at bargain-basement prices.

The People’s Solidarity for Participatory Democracy filed numerous criminal complaints against Lee Kun-hee for breach of trust in connection with the SDS affair in 1999. But in the end, prosecutors refused to indict him. Legal professors asked the authorities to investigate Lee over the Everland affair in 2000, but only company presidents — basically, Lee’s hirelings — were indicted. It wasn’t until 2008 that a special prosecutor investigating the Samsung scandal brought charges against Lee. The court acquitted Lee on the Everland charges and gave him a suspended sentence on the Samsung SDS charges, leaving him a free man.

What would have happened if Samsung’s illegal succession scheme had faced stern legal consequences 20 years ago? Would Lee Jae-yong have dared to give bribes, engineer an illegal merger, or commit accounting fraud? Even if Samsung hadn’t faced the music until the special prosecutor came around, we wouldn’t be dealing with the current situation.

Suppose that Lee does time in prison. That won’t cause serious disruptions to the Samsung Group or the South Korean economy. But even if that were a possibility, we’ve reached the point where we’d have to accept that risk. The very name of Lee Jae-yong has come to signify the fate of the rule of law in Korean society. Lee can’t be given another free pass without ditching the rule of law.

The press can’t seem to kick its bad habits, but the public is no longer willing to put up with this. The preferential treatment given to the son of Justice Minister Choo Mi-ae during his mandatory military service might not be a big deal, legally speaking. But the general public is enraged over the sheer unfairness of a conscript taking advantage of his mother’s political influence. Fairness has come to transcend the progressive-conservative divide. And there’s nothing more unfair than letting Lee off the hook for the lawbreaking that occurred in the management succession.

By Kwack Jung-soo, editorial writer

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