Scandals Aside, Samsung Moguls May Keep Power

Still, the shakeup announced Tuesday at Samsung headquarters -- and broadcast live across South Korea -- went further than many people here had expected.

As part of its self-imposed reforms, Samsung said it would abolish its much-criticized strategic planning office, a legally nebulous unit of top managers that oversees all company operations and has periodically run afoul of the law.

In 2006, in the denouement to an earlier Samsung scandal, that office voluntarily gave away $800 million to the government to be distributed in scholarships to deserving South Koreans.

The vice chairman and president of the strategic planning office are also resigning, as are the presidents of two other major Samsung companies implicated in the tax evasion charges.

In what he described as his "sincere apology" to the nation, Lee Kun-hee, 66, said he accepted "all legal and ethical responsibility" for "mistakes" made in the past.

According to the indictment last week, the largest of those mistakes was hiding about $4.5 billion worth of Samsung stock in accounts that used "borrowed names."

Lee hid the money from the government to preserve his management control over Samsung's various companies, the company acknowledged Tuesday.

In the indictment, Lee was charged with evading about $120 million in taxes on those hidden accounts.

Samsung officials said Lee would pay the back taxes and donate $2 billion of the hidden $4.5 billion of stock to "good causes" in South Korea.

Lee, who took control of Samsung after the death of his father in 1987, was also indicted for breach of public trust. Those charges focus on Lee's apparent efforts to keep the company in the family for a third generation. He allegedly arranged sweetheart stock purchases so that his son could control Samsung Group.

The scandal began last fall -- with sensational accusations of corporate bribery of leading figures in the South Korean power structure.

A former chief legal counsel for the company went public in October with claims that Samsung had a huge slush fund that it used to pay off politicians, prosecutors and other officials.

The counsel, Kim Yong-chul, said he personally delivered some of those bribes and named senior officials and prosecutors who allegedly took them.

Parliament appointed a special prosecutor, Cho Joon-woong, and gave him three months to investigate. Authorities soon raided Samsung offices and reported finding $4.5 billion worth of hidden stocks.

Cho said last week, however, that his investigators did not come up with sufficient evidence of bribery or of the alleged slush fund.

The prosecutor also declined to arrest Lee -- or any of nine indicted Samsung executives -- on the grounds that they had admitted to the charges against them and because their arrest could harm the South Korean economy.

The trial is set to start within two months.

"In order for South Korea's legal system to really establish its authority, I believe Lee should go to jail," said Kim, the economist who advocates good corporate governance. "But I don't think he will. It is highly likely he will get a suspended sentence and a pardon."

Special correspondent Stella Kim contributed to this report.