A former cabinet minister was arrested Saturday on charges that he illegally pressured the national pension fund to approve a merger between two Samsung subsidiaries, a deal that helped ensure that control of South Korea’s most powerful conglomerate passed from its chairman to his son.
Prosecutors have accused the former official, Moon Hyung-pyo, of ordering South Korea’s National Pension Service to cast a crucial vote in favour of the merger between Samsung C&T and Cheil Industries in July of 2015, when Moon was the health and welfare minister. Moon is now chairman of the pension fund, the world’s third largest, which is overseen by the Health Ministry.
Moon denied the accusation at a parliamentary hearing on November 30. But on Saturday, a court granted a special prosecutor a warrant to arrest him on charges of abusing power and interfering with what was supposed to be the pension fund’s independent investment decision.
A conviction of Moon on the charges would raise serious questions about the legitimacy of the $8 billion merger, which helped Samsung’s vice chairman, Jay Y Lee, tighten his control over the business that his father and grandfather built into South Korea’s biggest, most lucrative chaebol, or family-controlled conglomerate. Lee’s father, Lee Kun-hee, is Samsung’s chairman but has been incapacitated by health problems.
Moon was arrested by the special prosecutor investigating President Park Geun-hye, whose powers have been suspended since the National Assembly voted to impeach her on December 9. The special prosecutor is seeking to determine whether Moon acted on Park’s behalf.
The National Assembly’s impeachment bill alleged that Park solicited bribes from Samsung and other conglomerates, which she has denied. South Korea’s Constitutional Court is to decide in the coming months whether Park should be formally removed from office or reinstated.
In the months after the Samsung merger was approved, the conglomerate contributed $17 million to two foundations controlled by Choi Soon-sil, a longtime friend and confidante of Park’s who is a central figure in the corruption scandal. Samsung also signed an $18 million contract with a sports management company that Choi ran in Germany, to fund a program for training Korean equestrians that mainly benefited Choi’s daughter. Samsung also contributed $1.3 million to a winter sports program for young athletes that was run by Choi and her nephew.
State prosecutors, who have indicted Choi on extortion charges and named Park as an accomplice, have alleged that the two conspired to force Samsung and other businesses to donate to Choi’s foundations. But the special prosecutor, separately, is considering a much more serious charge of bribery, investigating whether Park, through Moon, ordered the pension fund to back the merger in exchange for Samsung’s support for Choi.