Suspicion is growing of a secret link between Samsung Group, South Korea's biggest family-run conglomerate, and President Park Geun-hye's longtime confidante Choi Soon-sil who has been indicted for criminal acts in conspiracy with the embattled President.
Choi was charged by prosecutors on Sunday with multiple counts, including abuse of power and extortion, and Park was identified as an accomplice to him, Xinhua news agency reported.
Choi, whose friendship with the President dates back to the 1970s, is accused of using the friendship to prod 53 conglomerates, including Samsung, into donating 77.4 billion won ($65.9 million) to two non-profit foundations controlled by Choi.
Samsung made the biggest donations, offering 12.5 billion won to Mir Foundation, a cultural fund, on October 27 last year and 7.9 billion won to K-Sports Foundation, a sports fund, on January 12 this year.
Prosecutors saw the donations as a move to avoid possible government retaliations such as tax inquires, but they also probed whether Samsung donated to get favours in the merger of its two subsidiaries.
The investigation would be a key to decide the criminal penalty on Park and her confidante.
Abuse of power and extortion carry the sentenced of a maximum of five years in prison, but conviction of bribery charge amounting to over 100 million won would earn punishment of at least 10 years in jail or life imprisonment.
According to the media reports, the prosecution office began to look into the merger of Samsung C&T and Cheil Industries last July to create a de facto holding company of the country's largest conglomerate.
It was aimed at helping Samsung Electronics Vice Chairman Lee Jae-yong to succeed management control from his father, Chairman Lee Kun-hee.
Elliott Management, a US hedge fund, strongly opposed the merger due to an unfair exchange ratio of stocks between the two affiliates. Elliott was the third-biggest shareholder of Samsung C&T before the merger.
Samsung proposed a swap of every Samsung C&T share for 0.35 Cheil Industries stocks. It was favourable to the shareholders of Cheil Industries, in which Lee and other members of the founding family held a 42 per cent stake.
Without the National Pension Service (NPS) vote in favour, Lee may have gotten into a big trouble in the transfer of power.
Local newspaper Hankyoreh reported last week that the presidential office Cheong Wa Dae and then Minister of Health and Welfare Moon Hyung-pyo pressured the pension fund operator to support the merger, citing a member of the NPS's advisory board.
The NPS usually hands over sensitive decisions to the advisory body, but the endorsement was determined by an internal discussion as over half of the advisors were highly likely to oppose the merger.
Citing the minutes of the internal discussion, Hankyoreh reported on Tuesday that the National Pension Service supported the Samsung-proposed exchange ratio though it acknowledged that an exchange of every Samsung C&T share for 0.46 shares of Cheil Industries would be fair.
If it proves that the presidential office pressed the NPS to back the Samsung merger in return for bribes, Park and her confidante would face the minimum of 10-year imprisonment.
Moon, former Wealth Minister who is the NPS Chairman, has denied the allegations.
Park met separately one by one with seven heads of them, including Lee Jae-yong.
Lee and other senior Samsung executives had been summoned by prosecutors for questioning.
--IANS
py/vt
Disclaimer: No Business Standard Journalist was involved in creation of this content
