Samsung Drawn Into Korean Political Crisis After Offices Raided
Samsung Electronics Co. has been dragged into South Korea’s presidential scandal after investigators raided its headquarters, the latest headache facing Vice Chairman Jay Y. Lee as he tries to navigate a path out of its product recall crisis.
South Korean prosecutors entered the offices of Samsung as they search for evidence the smartphone maker illegally provided gifts for a confidante of President Park Geun-hye that is at the center of an influence-peddling investigation. The company confirmed the raid and declined to comment further.
The prosecutor’s raid comes as Lee deals with fallout from the exploding Note 7 debacle, which is estimated to cost the company more than $6 billion. The 48-year-old, who only joined the board last month, also has to contend with a U.S. recall of its washing machines and a push by activist investor Paul Elliott Singer for Samsung to restructure, return cash to investors and improve transparency.
“Right now, the Corporate Strategy Office is in a state of panic,” said Kim Sang-Jo, executive director of the community group Solidarity for Economic Reform and a professor of economics at Hansung University, referring to Lee and other executives who lead the company. “Demands for Samsung to improve its management structure will intensify among institutional investors and personal investors, and even among civic groups like mine.”
Shares of Samsung Electronics were little changed in Seoul trading and had gained 30 percent this year before today.
A spokesman at the Seoul Central District Prosecutors’ Office confirmed that prosecutors entered Samsung’s headquarters in Suwon, south of Seoul, at 6:40 a.m. on Tuesday, declining to give further details of the size of investigation and whether the examination is still ongoing.
Yonhap News earlier reported, without citing anyone, that Samsung is suspected of providing 3.5 billion won ($3 million) to a company owned by Choi Soon-sil to fund equestrian training in Germany for her daughter. Choi is a confidante of Park, who is at the center of an influence-peddling investigation.
Park has been under pressure to resign in the wake of the scandal with tens of thousands of protesters demanding her ouster. Her approval rating has plummeted after media reports that Choi, a long-time friend of Park’s and a private citizen, has taken advantage of their relationship to meddle extensively in state affairs.
Choi was formally arrested on Nov. 3 on charges of attempted fraud and abuse of authority. Park offered a national apology the next day, saying that she feels “great responsibility” and that she would cooperate with investigators over allegations that her friend had undue influence. A Gallup Korea poll released the same day showed her approval rating dipped to 5 percent from 17 percent a week earlier.