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(EDITORIAL from the Korea Herald on Jan. 20)

All News 07:10 January 20, 2017

Painful, but worthwhile
Case of Samsung's Lee should provide lesson for all

The case of Samsung Group's Lee Jae-yong shows how easily Korean conglomerates -- however global they may be -- can fall into a deep crisis for reasons not directly related to their business.

Although Lee was spared from being placed behind bars, his implication in an influence-peddling scandal involving President Park Geun-hye and her confidante Choi Soon-sil is damaging the image of a company whose products, including smartphones, dominate world markets.

Despite the court's rejection of an arrest warrant for him, Lee and his top executives still will face legal problems for months to come, which will certainly impede normal operation of the conglomerate.

Some of the losses incurred by the turmoil will be incalculable. For instance, how can one put into figures what Lee -- more broadly Samsung and South Korea -- forfeited by missing the "tech summit" US President-elect Donald Trump hosted last month? People like Apple CEO Tim Cook participated in the meeting, to which Lee was the only non-American CEO invited. At that time, Lee was banned from leaving the country due to his implication in the scandal.

The problem is that Samsung is not the only conglomerate under investigation. There are as many as 53 companies that donated a combined 77.4 billion won ($65.7 million) to two foundations controlled by Choi.

The independent counsel team investigating the scandal believes all the money should be regarded as bribes. In Samsung's case, the team argued for the arrest warrant that all the money -- 20.4 billion won donated to the Mir and K-Sports foundations and another 22.7 billion won Samsung committed or provided to Choi's daughter and niece -- was bribes, which were offered in return for government favors with the merger of two Samsung affiliates.

The court rejected an arrest warrant for Lee because it could not find evidence supporting the alleged connection between the donations and the merger of Samsung C&T and Cheil Industries in 2015, which critics said was aimed at consolidating Lee's control over the Samsung Group.

Lee and Samsung denied the accusation, insisting the company donated the money under pressure and coercion from Park and her aides and that they did not solicit any government favors in return.

Now that the court has rejected the warrant to detain Lee, one may need to think about the root causes of the scandal. First of all, it is a case of abuse of presidential power which is all too common in Korean politics.

The key part of the scandal is that Park twisted the arms of conglomerates -- as did her predecessors -- to contribute funds to the two foundations established under the auspices of Choi. This is typical of Korean presidents who draw private funds to their pet projects in the name of "voluntary donations." Lee Myung-bak, Park's immediate predecessor, was no exception, as he had conglomerates line up to donate money to a youth employment fund and a microcredit fund.

Businesses cannot avoid blame either. Most big companies are accustomed to collusive ties with the government. It is possible that some of the conglomerates who contributed money to the Mir and K-Sports foundations anticipated or sought government favors in return.

The final verdict on who did what kinds of wrong and what punishment they will receive will be made by the court after some more time. But what the scandal reminds us is that collusive ties in Korean politics and business die hard.

Lee spent nearly the whole night at a detention house awaiting the decision of the judge who looked over the arrest warrant for him. It was the first time a member of the Lee family has ever been to such a facility.

That painful experience could turn out worthwhile if he resolved not to donate money for dubious purposes again. As the No. 1 conglomerate, Samsung often sets the path, and it could do the same in fighting collusion and cronyism too.

It is needless to say that politicians and bureaucrats should cease thinking about extorting money from businesses.

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