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Ring of Fraud Series: Exploring Corruption in the Republic of Korea

By Jared Dorman | February 7, 2017



In December 2016, South Korean president Park Geun-hye was impeached over a corruption case that captivated the nation. During an anti-corruption probe in regards to two newly-created charitable foundations (Mir and K-Sport), investigators discovered that one Choi Soon-sil was in charge of both foundations. Choi staffed the foundations with people close to her, and the foundations received nearly $70 million in donations through the Korea Federation of Industries, South Korea’s premier business lobby. During the investigation, investigators discovered Choi’s personal tablet, which contained drafts of President Park’s speeches (along with edits), as well as other confidential documents. The idea that the president was being influenced by an un-elected confidant out to enrich her family incited a furor throughout the populace.


President Park’s impeachment was not the end of the story, however. Just last week, South Korean prosecutors requested a warrant for the arrest of the de facto head of Samsung, Lee Jae-young. Prosecutors believe that Vice Chairman Lee lied under oath about donating money to Choi’s foundations to curry preferential treatment from the government; at the time, Samsung needed governmental approval for a controversial merger of two of its affiliates, which it received. Nearly $20 million of the previously mentioned $70 million in donations came from Samsung.


If prosecutors determined that Lee bribed the government, action should have been swift. Lee Kyu-chul, spokesman for the independent counsel charged with investigating Lee, indicated that “The national economy is important, but upholding justice is more important.” At first glance, this seems like an odd statement. Investigators should be concerned first and foremost with justice and the law, not the economy. However, the prosecutors indicated that they would also take into account the economic effects of the Lee’s arrest.


This is not a new phenomenon in South Korea. In 2015, South Korea’s Minister of Justice pardoned over 6,500 convicts on its national holiday celebrating independence from Japan. Along with other prominent business leaders, the chairman of SK Group (one of the largest conglomerates in South Korea) was pardoned so that he could resume running his corporation. The government hoped that his leadership would help SK Group run more effectively, increasing economic output and creating jobs. The mixed messaging by the government left the final fate of Lee upi n the air.


Unfortunately for those critical of the preferred treatment given to the conglomerates, a South Korean court rejected the arrest warrant for Lee. The innocence or guilt of Lee and Samsung in this case are immaterial, as the failure to arrest plays into the narrative that the conglomerates and their CEOs are still beyond reproach. It remains to be seen whether the special prosecutor will present more evidence against Samsung in order to attempt to obtain an arrest warrant again.


South Korean conglomerates have long played by different rules than their smaller contemporaries. With the fallout from the Park Geun-hye scandal eroding the public’s already weak trust in government and institutions, the tide can be reversed with prudent action. Most importantly, economic effects should not be taken into account by the justice system. It can hardly be called justice if different strata of society are not being held equally accountable for their actions. If someone is guilty of a crime, be they a CEO, a politician, or an average citizen, they must be given the same treatment by the justice system. This will not be easy, as it will require changes to both political and business culture in South Korea. However, it is clear that the Korean people are running out of patience with the status quo.


Jared Dorman is a second year MIA graduate student at GPS. His concentrations are International Economics and Korea. He also serves as an editor for JIPS.

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