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With a three-month special investigation nearing its climax, Lee Kun-hee, chairman of the Samsung Group, was summoned on Friday for questioning. The investigation may result in the imprisonment of the country's most respected business tycoon.
Lee, 66, appeared tense as he walked into the independent counsel's office in Seoul, surrounded by about 300 reporters and media staff. "I am very sorry to the people and there should be no more problems of this kind, whether they are true or not," he told reporters. But he denied any irregularities.
Special prosecutors vowed a "comprehensive and intensive" interrogation of the business leader, who is suspected of masterminding a bribery network to smooth the illegal transfer of a controlling stake in the family's business to his only son, avoiding inheritance tax.
The interrogation would be focused on Samsung Everland's sale of convertible bonds in 1996 to Lee's son, Lee Jae-yong, at one-tenth of market value and without paying proper tax, in an apparent bid to pave the way for a dynastic transfer of managerial rights. Major shareholders of all Samsung affiliates yielded the right to acquire the bonds.
The deal effectively made the junior Lee the largest shareholder of Everland, which serves as a de facto holding company by playing a key connecting role in a complicated web of cross-shareholdings among group affiliates.
Jae-yong, 40, currently has a controlling 25.10 percent stake in Everland. His three sisters allegedly own about 25 percent. Everland owns a 19.34 percent stake in technology giant Samsung Electronics, which in return controls 7.23 percent in Samsung Life Insurance.
The insurance affiliate has a 46.85 percent stake in Samsung Card that holds 25.64 percent in Everland, completing the web of cross-shareholdings which ensures the Lee family controls the whole conglomerate with a small stake.
In another step to inherit the empire, Jae-yong has served as an executive director of Samsung Electronics, the world's largest computer-memory chipmaker, the world's leading maker of LCD panels and second-largest maker of mobile phones. Jae-yong was already summoned and questioned by special prosecutors in February over the allegedly illegal bond trades and other irregularities.
Special investigators have been probing the Samsung empire since January, following allegations made by Samsung's former top legal executive, who said the group used its subsidiaries to help create a 200 billion won (US$205 million) slush fund to bribe government officials, judges and prosecutors.
The whistle-blower also alleged that Lee's wife, Hong Ra-hee, used the South Korean conglomerate's funds to buy expensive art works abroad. Hong, director general of Leeum Samsung Museum of Art, was questioned earlier this week over allegations that a suspected slush fund set up by Samsung was used to buy expensive paintings in 2002 and 2003, including "Happy Tears" by American pop artist Roy Lichtenstein.
Her brother, Hong Seok-hyun, a former ambassador to the United States and publisher of the country's vernacular daily JoongAng Ilbo, has also been summoned over the case.
Special prosecutors have raided several of Samsung's buildings for the probe, including the group chairman's house and his private office. Samsung Vice Chairman Lee Hak-soo, considered Lee's closest confidante, has been repeatedly questioned during the probe.
The independent counsel has vowed to clarify the suspicions by the end of its mandate on April 23. If found guilty, Samsung Group would face a strong public outcry, as it has already been hit by a series of corruption scandals. But the independent counsel's summons to Lee is widely believed a procedure to wrap up the probe without indictments of Lee's family.
Lee's interrogation was his second since he inherited the business empire after the 1987 death of his father and founder of the conglomerate Lee Byung-chull. He was indicted in 1995 when he, along with other business leaders, was found guilty of bribing former President Roh Tae-woo in the early 1990s.
Lee has been embroiled in various court cases, but he left South Korea whenever a probe began and returned home in a wheelchair with medical staff, apparently wooing public sympathy and avoiding interrogation.
A group of civic activists and pro-labor lawmakers staged a rally on Friday in front of the independent counsel's office to call for a thorough probe into Lee's family and their arrests.
On the other hand, the country's major business organizations issued a joint statement urging a prompt end to the investigation into Samsung Group, saying it would deal another major blow to the South Korean economy, which is already suffering a slump.
Samsung's 58 subsidiaries, whose business ranges from credit card service to insurance, hospitals, apartments, hotels and amusement parks, account for 18 percent of South Korea's gross domestic product and one-fifth of its exports.
