Samsung heir Jay Y. Lee is being accused of bribing South Korean President Park Guen-hye and prosecutors are seeking his arrest. As part of a larger corruption investigation into President Park, prosecutors are claiming that Lee directed Samsung subsidiaries to pay out over 43 billion Won ($36 million) to Park’s confidante/adviser and related foundations. Prosecutors allege that payments helped to secure a merger of two affiliates which would eventually help Lee’s case to attain control of the family-controlled company. Prosecutors also tacked on charges of embezzlement and perjury on top of the bribery charges.
South Korea’s president park is being accused of extorting over $69 million from big business to an adviser and various foundations in return for favorable policy decisions.
In a testimony at a hearing last month, Lee claimed he was not responsible for the decision to make these payments, and added the company was a victim of extortion, saying the payments were not voluntary. 53 large businesses in all are being accused of bribing the office of the president, all which deny such allegations, claiming the victim card.
What does this mean for Samsung?
Mark Newman, an analyst with Sanford C. Bernstein, says “Big things, like restructuring or a new big multibillion-dollar investment, things like that might be tricky for him [Lee] to get to.”
Newman goes on to say that Samsung, or other large companies in Korea, act as lobbies and special interest groups. “In the US, there are a lot of powerful lobbies, like the gun lobby, but in Korea the equivalent is the Samsung lobby or the Hyundai lobby,” Newman tells the New York Times.
Samsung generates about $230 billion in revenue annually, which accounts for roughly 17 percent of South Korea’s economy. Samsung has largely been controlled by one family since its existence. While broader strategic decisions are dictated by the chairman of the company day-to-day operations are run by executives and managers of the company. While these events will not impact immediate product delivery, it may push back larger, long-term strategy decisions.