South Korean tycoons to take center stage in political scandal

Reuters News
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Posted: Dec 05, 2016 8:07 AM

By Se Young Lee and Hyunjoo Jin

SEOUL (Reuters) - The heads of nine of South Korea's top conglomerates controlling revenue equivalent to half the country's economy face an unprecedented televised grilling by lawmakers on Tuesday, as the glare from a widening political scandal falls on Korea Inc.

A parliamentary panel is investigating whether the so-called chaebol, which include the heavyweight Samsung and Hyundai Motor Groups, were pressured by President Park Geun-hye or her friend and aide to give money to two non-profit foundations backing Park's policy initiatives in exchange for special treatment.

Park faces an impeachment vote on Friday, laying the ground for her to be the first democratically elected leader to leave office early in disgrace.

Samsung heir apparent Jay Y. Lee is expected to take center stage at the hearing, after prosecutors raided the group's offices last month. Samsung donated 20.4 billion won ($17.42 million) to the two foundations, the most of any group.

None of the chaebol, which are among 53 corporate groups that gave money to the foundations, has been accused of wrongdoing in the case, and Samsung has said it will cooperate with prosecutors.

Park is under intense public pressure, with huge demonstrations calling for her to quit and an approval rating that has plunged to just 4 percent.

While high-profile witnesses often manage to avoid testifying to South Korea's parliament, none of the nine chaebol bosses has asked to be excused, according to an official at the parliamentary committee.

"The chaebol chiefs' testimony will be linked to the reasons why she faces impeachment," said Chung Sun-sup, head of corporate analysis firm chaebul.com.

"If the chaebol chiefs try to dodge this the blowback will be huge; they can't get out of this."

SEATING CHARTS

The family-controlled chaebol have long dominated Asia's fourth-largest economy, often working closely with the government in a system that helped the country rebuild from the ravages of the 1950-53 Korean war but that critics say is due for reforms including improved corporate governance and transparency.

Local media have been fixated over details of the hearing, publishing a seating chart that puts Lee, 48, at the center and the two oldest chairmen, including the 78-year-old Hyundai Motor Group Chairman Chung Mong-koo, at the ends of the witness table, evidently to give them easier access.

Some reports have said an ambulance and medical staff will be on standby for Chung, who underwent heart surgery in 2009.

Hyundai declined to confirm the reports, but said in an email to Reuters: "Considering the lengthy process of the hearings and the current age of the chairman, we're taking necessary precautionary measures."

The hearing begins at 10 a.m. (0100 GMT) and could run until 10 p.m., according to one participant, with crowds of media and protesters expected to gather outside the domed riverside parliamentary building, built in 1975.

The hearing will break for lunch, and witnesses will have the option of making their own plans, which could include a meal at the guest dining room that will serve cheese donkatsu (fried pork cutlet) or a fish cake dish, for 9,000 won ($7.70).

A staff member at the parliament's VIP restaurant, which requires an invitation from a lawmaker, said he was not aware of any special plans for the group.

Each witness can bring one lawyer and one company official to the hearing, and, if needed, an aide for medical support, according to a lawmaker's office.

HEAVY HITTERS

An official at retail-to-chemicals giant Lotte Group said Chairman Shin Dong-bin was "calmly preparing for tomorrow's hearing at his office with the group's executives", and that his answers were unlikely to yield surprises.

Pressure on Park to step down is growing as some members of her Saenuri Party say they will vote for impeachment. Saturday night saw the biggest crowd yet at weekly protests in Seoul. Organisers said 1.7 million people participated, while police said the crowd peaked at 320,000.

The combined revenue of the groups appearing on Tuesday is $776 billion, equivalent to more than half of South Korea's GDP ($1.35 trillion). The nine bosses have combined net worth of $18 billion, according to Forbes, led by Lee's $6.2 billion.

Park Ju-gun, head of corporate analysis firm CEO Score, said he did not expect any major revelations at the hearing, but the fact that it was taking place was important.

"There are two powers in South Korea that were untouchable - the president and the chaebol owner families," he said. "The two powers that were previously impervious are now being checked and criticized, and that is significant."

(Reporting by Se Young Lee, Ju-min Park, Hyunjoo Jin, and Yun Hwan Chae; Writing by Tony Munroe; Editing by Alex Richardson)