Korea's Samsung stirs controversy over corruption claims

By Jon Herskovitz
Monday, December 10, 2007; 8:34 AM

SEOUL (Reuters) - There are three things South Koreans cannot avoid: death, taxes and Samsung.

The Samsung Group, the country's largest conglomerate, runs hospitals where Koreans are born, apartments for raising families, funeral halls for deaths and just about everything else in between.

Best known for Samsung Electronics, the world's top maker of LCD screens and memory chips, the Samsung Group had sales in 2006 of $159 billion, about equal to one-sixth of the country's gross domestic product.

With almost 60 affiliates, it accounts for about one fifth of the country's exports and stock market value.

Welcome to "The Republic of Samsung."

"Samsung's influence surpasses the economic level and reaches out to influence politics, society, culture and even ideology," said Kim Sang-jo, executive director of Solidarity for Economic Reform, which is calling for better corporate governance.

But according to a former top Samsung legal executive, it is a corrupt place where the company kept a slush fund of nearly $220 million to bribe public officials so they would not pry too deeply into its management practices.

This week, prosecutors widened a probe into Samsung by banning more of its executives from traveling overseas and raiding affiliates to look for incriminating documents.

Samsung has vehemently denied the allegations and issued a detailed rebuttal of the claims made by the former executive Kim Yong-cheol, who left the company in 2004 and waited three years before blowing the whistle on corruption.

Samsung, which means "three stars," is South Korea's best-known brand as well as its flagship firm for global success.

Samsung has faced corruption investigations before and mostly emerged unscathed, but having allegations made by someone who was privy to the group's inner workings is new.

The investigation comes just ahead of the country's December 19 presidential election, where corruption has been a heated issue, and could spill over into the April election for parliament.

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