Samsung Chief's Triumph Turns to Travail

The Associated Press
Sunday, December 2, 2007; 3:38 PM

SEOUL, South Korea -- Lee Kun-hee, chairman of Samsung Electronics, has been no stranger to scandal as head of South Korea's largest company and the huge conglomerate it anchors.

And he has emerged each time, even from a bribery conviction, relatively unscathed.

But new allegations _ chiefly, that the conglomerate maintained a $215 million slush fund used to pay off influential figures _ have the 65-year-old tycoon up against a wall instead of celebrating two decades of corporate success.

In addition to an investigation by prosecutors, who carried out raids Friday at offices of two Samsung affiliates, an independent counsel approved by President Roh Moo-hyun under pressure from lawmakers is set to probe the Samsung Group, which spans about 60 businesses.

Such turmoil inevitably focuses attention on Lee, whose leadership has made Samsung Electronics a top global company. But it also raises questions about the continued power of the family-run conglomerates, called chaebol, that have led South Korea's growth the last half-century.

Samsung is perceived to play such a pivotal role in the domestic economy and to have such social and even political influence that South Koreans sometimes call their country the "Republic of Samsung."

Samsung has vociferously denied the allegations, aired last month by a former legal officer for the conglomerate, that it used questionable accounting practices to create the slush fund to bribe prosecutors, judges and lawmakers to win influence.

Kim Yong-chul, once Samsung's top lawyer and previously a prosecutor, also claimed Lee's wife purchased "Happy Tears," a painting by the late pop artist Roy Lichtenstein, with slush fund money _ a claim Samsung also denied.

The investigations are expected to take months. When asked if Lee had any public comment about Kim's allegations, a Samsung spokesman said the chairman himself had made no statements and referred to the group's written denials.

Lee took over Samsung 20 years ago Saturday _ on Dec. 1, 1987 _ after the death of his father, the conglomerate's founder. In those days, it was mostly known for mass-producing cheap electronics: Quantity and low prices trumped quality and design.

Fed up, Lee summoned top executives to a meeting in 1993 and called for a transformation.

"Change everything but your wife and kids," he exhorted them.

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© 2007 The Associated Press