Investigators step up raids on Samsung

SEOUL: Investigators probing a bribery scandal allegedly involving Samsung raided the chairman’s private home, the group headquarters and other facilities on Tuesday, officials and news reports said.

A four-and-a-half-hour unprecedented search was underway at Lee Kun-Hee’s luxury residence in the central Seoul district of Hannamdong, Yonhap news agency said. The team of prosecutors and police also raided the city-centre headquarters, said Samsung officials. Yonhap said the team also searched two group electronic data centres south of Seoul.

A Samsung spokesman said he was unaware of a raid on Lee’s private home. On Monday investigators had searched another property owned by Lee, which houses a private office and is also used to host VIP guests. An independent inquiry began last week into claims by Samsung’s former chief lawyer that the group had created a multi-million-dollar slush fund to bribe prosecutors, government officials and journalists.

YTN cable television news said a key focus of the search at the headquarters was the strategic planning office, which coordinates activities of affiliates and is under Lee’s direct supervision. Yonhap said a search was underway of the 27th floor, where the strategic planning office is located, and the 28th floor where offices of chairman Lee and vice-chairman Lee Hak-Soo are sited.

Legislators from all parties had voted in November to set up the independent inquiry despite objections from the government, which said it would tarnish Samsung and the country. The probe, which can last up to 105 days, is seen as a test of South Korea’s determination to crack down on allegedly shady business practices by family-controlled conglomerates.

Samsung, which wields enormous influence, has denied the bribery claims. Its group assets are valued at $280.8 billion and exports were worth $66.3 billion last year, more than 20% of the nation’s total.

Kim Yong-Chul, who headed Samsung’s in-house legal team for seven years until 2004, has accused it of opening bank accounts in the names of senior staff including himself to manage the slush fund. Kim has claimed he had taken part in creating the fund totalling over seven trillion won ($7.5 billion).

Yonhap said state prosecutors, who mounted an earlier inquiry before handing over their findings to the independent team, had scrutinised 1,000 accounts opened under the names of 150 former and current executives. Apart from the slush fund claims, the investigation will consider whether illegal funds were provided during and after the last presidential election in 2002.

Another key allegation it will consider involves the murky transfer of the ownership of Everland, Samsung’s de facto holding company, from the chairman to his son Jae-Yong. Senior Samsung executives were convicted in 2005 and last year of involvement in the illegal ownership transfer, but are appealing. Samsung Electronics, the group’s flagship, said separately Tuesday its net profit dropped 6.6% year-on-year in the fourth quarter amid falling prices for computer memory chips.

The world’s largest memory chip maker said it earned 2.212 trillion won ($2.36 billion) on sales of 17.48 trillion won in the quarter. Chu Woosik, its vice-president, said Tuesday’s raids took place while he was holding an investor relations session at the headquarters on the results. “It may be too much to say we are hit hard by this but it is true this affects us in a no-good way,” he said.