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Samsung engulfed by scandal in Korea

News, 17 January 2017
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SEOUL: After a difficult 2016, Samsung Electronics is facing another hit as the corruption scandal engulfing the South Korean government spreads to a top company executive.

According to multiple news reports, special prosecutors in Seoul have requested a warrant for the arrest of Lee Jae-yong, Vice Chairman of Samsung Electronics and de facto head of the business. The company is suspected of giving 43 billion won (US$36.42m) to Choi Soon-sil, a long-time friend of now-impeached South Korean president, Park Geun-hye, in order to gain government influence.

Samsung, South Korea's largest and most valuable company, is attempting to rehabilitate its brand following the global recall of Galaxy Note 7 smartphones late last year. It previously warned of a $5.1bn hit to operating profits after the decision to shutter its flagship smartphone model just weeks after launch.

Despite the difficult period, Samsung enjoyed a more buoyant than expected holiday season and recently announced three new Galaxy smartphone models to launch in early 2017: The Galaxy A7, Galaxy A5 and Galaxy A3. But the latest allegations could again hurt Samsung's brand, just as it was getting back on track.

"Samsung is a global company and this scandal will tarnish its brand globally," said Jung Sun-sup, head of corporate watchdog Chaebul.com, to the Financial Times in Seoul.

Vice Chairman Lee had previously acknowledged making donations, which included a $1m show horse, to foundations controlled by Choi Soon-sil under Parliamentary questioning, but denied expecting anything in return. Choi, however, has since been jailed and is facing trial.

A Seoul court will consider the arrest request on Wednesday, but Samsung said in a statement: "It is difficult to understand the special prosecution's decision".

Data sourced from Associated Press, Financial Times, Reuters, BGR; additional content by Warc staff

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