Samsung in hot water at home

The Samsung group was in hot water on Wednesday after its patriarch was told to appear before South Korea’s Parliament and the president attacked the country’s top conglomerate for its controversial corporate governance record.

In a rare move, the National Assembly’s finance and economy committee decided late on Tuesday to summon Samsung group chairperson Lee Kun-Hee next week and question him over debts left unpaid by the group’s bankrupt Samsung Motors.

The parliamentary move coincided with an attack by President Roh Moo-Hyun, who charged the group is seeking to sidestep a government drive for corporate governance reform.

Roh also took issue with the controversial acquisition of shares in a Samsung group unit by Lee’s son, Jay-Yong, widely seen in South Korea as heir apparent.

“We’ve decided to summon chairman Lee to have him testify about the huge losses left by the bankruptcy of Samsung Motors,” said committee spokesperson Song Young-Kil, a lawmaker of the ruling Uri Party.

Lee has been asked to appear before the committee on Wednesday next week.

“Samsung’s contribution to the national economy is certainly enormous, but that does not mean that Samsung should be beyond the reach of the law,” Song told reporters.

It is unknown whether the 64-year-old tycoon, currently in the United States for a medical check-up, will respond to the summons, but he could face up to three years in jail or about $9 900 in fines if he decides not to appear.

Aside from Lee, the National Assembly called in other Samsung executives, including the influential vice-chairperson of Samsung Electronics, Yoon Jong-Yong.

Lawmakers on the committee said the questioning of Samsung executives will centre on the dispute between Samsung and Samsung Motors’ creditors over the auto unit’s unpaid debts, estimated at 4,7-trillion won ($4,6-billion).

The Samsung officials may also face questions about Lee’s future role in the company and the group’s practice of building cross-shareholdings among its units, parliamentary sources said.

Roh lashed out at Samsung late on Tuesday, calling the group’s attitude toward the government’s drive for corporate reform “problematic”.

“Even if it is not pleased [with the government and regulations on corporate governance], it should accept, respect and comply with the regulations and try to arrange management and corporate governance in line with them,” Roh said.

Under a 1997 law, financial units belonging to conglomerates are banned from owning more than a 5% stake in non-financial affiliates of their parent groups without government permission.

The government is now drawing up amendments under which conglomerates will be compelled to dispose of all stock holdings that exceed the 5% limit in an effort to curb family control over the groups and better protect other investors.

Samsung has publicly objected to those regulations, claiming they will make it and other companies more vulnerable to hostile takeovers by foreign investors. This is a sensitive issue in South Korea, where many failing companies were bought cheaply during the 1997/98 Asian financial crisis and then sold for large profits by their foreign owners.

Roh also criticised Samsung over the transfer of convertible bonds in the group’s de facto holding company, Samsung Everland, to Lee, paving the way for Lee’s only son to succeed his father as chairperson.

Prosecutors last month demanded jail terms of up to five years for two former Samsung Everland executives for handing over the bonds at a fraction of their market value, causing about $95-million in losses to the company.

The Samsung group on Wednesday declined any comment on the president’s remarks and declined to confirm whether Lee would respond to the parliamentary summons.—Sapa-AFP

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