Create a free Industrial Equipment News account to continue

Samsung, Pension Fund Raided as South Korean Probe Widens

Public anger toward Samsung has been simmering because of its alleged links with Choi Soon-sil, a long time friend of South Korea's president who is embroiled in a corruption scandal.

South Korea Politics Well 5835a2c5afab7
Jang Se-young/Newsis via AP

SEOUL, South Korea (AP) — South Korean prosecutors investigating a corruption scandal surrounding the country's president and her friend raided a unit of the country's largest business group, Samsung, and the national pension fund on Wednesday, as public outrage grows over Samsung's alleged link to the scandal.

An official at the Seoul Central District Prosecutors' Office said investigators seized documents, computer hard drives and other materials at Samsung Group's corporate strategy office in Seoul and at the National Pension Service's offices in Seoul and its headquarters in Jeonju. The official declined to be named, citing office policies.

The targets of the raids included the NPS' Investment Management Office, according to an NPS official who also declined to be named.

Samsung spokeswoman Lim Bomi confirmed that investigators raided the company but declined to comment further.

The raids took place as the political fallout from the scandal continued to grow after prosecutors charged Choi Soon-sil, President Park Geun-hye's long-time friend, and two presidential aides on suspicion of interfering with state affairs and bullying companies, including Samsung, into giving tens of millions of dollars to foundations and businesses Choi controlled.

The presidential office said Wednesday that two other officials, the justice minister and senior presidential secretary for civil affairs, had offered to resign. The resignation offers, if approved, could deal a further blow to Park, who has already been forced to fire eight presidential advisers since the scandal exploded. Park has refused to meet prosecutors who said she conspired in criminal activities with the confidante.

While Park faces mounting calls to resign over the scandal, public anger toward Samsung has also been simmering because of its alleged links with Choi.

It is not the first time Samsung has been raided by prosecutors investigating the scandal. Top Samsung executives, including Samsung chairman's son Lee Jae-yong, were questioned by prosecutors earlier this month, along with other top South Korean business executives. Other Samsung companies have been raided during the probe.

But the fact that the target of the latest raid was Samsung Group's corporate strategy office indicates that Samsung might be deeply involved in the scandal. Samsung established the office in December 2010 to support affiliates and help improve synergies among various Samsung companies. But in reality the unit, headed by Lee's mentor, served as a control tower that oversees key corporate decisions.

South Korea's Yonhap news agency reported earlier that prosecutors were looking into whether the presidential office played a role in the pension service's vote to support the controversial merger of two Samsung companies last year.

Samsung narrowly won shareholders' approval to merge Samsung C&T and Cheil Industries in July 2015.

Most investors and analysts questioned Samsung's argument that the deal would create synergies between a Samsung construction company and another Samsung company that ran an amusement park and fashion businesses.

The merger deal was crucial for Lee, the Samsung heir, who held a small stake in Samsung Electronics. It helped Lee, a grandson of Samsung's founder and a vice chairman at Samsung Electronics, strengthen his grip on Samsung Electronics, the group's crown jewel, without spending his own money.

Shareholders who opposed the merger, including U.S. hedge fund Elliott, said the deal unfairly benefited Samsung's founding families while hurting minority shareholders.

In the end it was the National Pension Service, a major shareholder at both Samsung C&T and Cheil Industries, that played the role of kingmaker in the shareholder vote. The pension fund voted in favor of the merger even as some outside advisers recommended it oppose the deal.

The pension fund came under scrutiny over how it reached the decision to support the merger. Public anger has been growing in recent weeks after one estimate showed that the value of the pension fund's stake in Samsung C&T, the merged entity, fell by hundreds of millions of dollars.

In response to the allegations that the pension fund yielded to the pressure from the presidential office to support the deal, the National Pension Service said its decision was based on its independent review of the deal in line with its own policies.

More in Regulation