Scandals Aside, Samsung Moguls May Keep Power

In S. Korea, Corporate Titans Can Avoid Career-Ending Punishment

SEOUL, April 22 -- It's been a tough week for the family that, over the course of two generations, built the largest business conglomerate in South Korea.

Lee Kun-hee, chairman of the Samsung Group, was indicted last Thursday for alleged tax evasion and breach of trust. He resigned in disgrace Tuesday after apologizing to South Koreans for causing "much grief."

His wife is stepping down as head of a Samsung art gallery and cultural foundation. And his son -- long regarded as heir apparent to the Samsung throne -- was pushed out of his senior management position and will go into exile as a manager in a yet-to-be-named emerging market.

But don't count the Lee family out yet.

A peculiar tick of the South Korean legal system is that judges here -- not wanting to upset the economic apple cart -- rarely sentence corporate titans to long prison terms and seldom strip them of their empires.

The Lee family, for all its public relations woes and legal entanglements, remains the dominant shareholder in Samsung, founded as a trading company in 1938 by Lee Kun-hee's father, Lee Byung-chull.

Today, the cluster of 59 companies makes everything from memory chips to ships, employs a quarter-million people around the world and accounts for a fifth of South Korea's exports. About 55 percent of the company is owned by foreign investors.

A recent study of white-collar prosecutions found that in 82 percent of cases, South Korean judges released convicted executives without requiring prison time. This pattern of leniency derives, in most cases, from a judge's determination that a corporate defendant has contributed to the growth of South Korea's economy.

And while Lee Jae-yong, son of the now ex-chairman, is to be sent abroad in penance, his long-term ability to shape the company's future seems likely to endure, owing to his family's complex web of stock cross-ownership throughout the conglomerate.

"I do not expect to see substantial change in who runs Samsung," said Kim Sang-jo, an economics professor at Seoul's Hansung University.

"The power of the Lee family over succession at Samsung will remain," said Kim, who is also executive director of Solidarity for Economic Reform, a group that has been lobbying for corporate and legal reform for 18 years.