Latest South Korean scandal could damage business giant Samsung

In South Korea, the heir to the Samsung empire was indicted this Tuesday on multiple charges, including bribery and embezzlement. Prosecutors have also indicted four other top executives, in what is the latest blow to the world's biggest smartphone maker. RFI takes a look at what it all means.

Lee Jae-Yong, the heir of the Lee family, owners of Samsung. Reuters/Jung Yeon-Je

Lee Jae-Yong, the 48-year-old heir of Samsung's founding Lee family, has been at the helm of the conglomerate since his father suffered a heart attack in 2014.

On top of charges of bribery, embezzlement and hiding assets overseas, Lee is also accused of perjury. This makes Lee and his colleagues almost certain to face trial.

This scandal comes after Samsung had to recall one of its latest smartphones over battery issues.

"In the short term, obviously anything that creates business uncertainty [for Samsung] is not good," says Aidan Foster-Carter, a South Korea expert. "I think it's quite widely agreed upon in South Korea, that although Samsung is the national flagship, being a conglomerate, it's kind of too big."

Too big to fail?

With Samsung contributing to one fifth of South Korea's GDP, this scandal could be an issue for the country's economy.

South Korea is largely dominated by family-controlled conglomerates, called "chaebols", such as Samsung. Many worry that they are too big and have too much political influence.

"Those conglomerates are very powerful," says Antoine Bondaz, an expert on South Korea with Sciences Po's International studies research centre.

"They have been criticised by every political party for the past 20 years, yet the conservatives were actually quite close to the chaebols. What's new here is that the head of chaebol can be convicted, and that the public is aware of collusion between the politicians and the companies. This is something quite symbolic."

The Samsung group has announced the dismantling of its governing body. This so that the different units and subsidiaries would be allowed to run more independently.

"I'm glad that they've announced that they have abolished their strategy office, so from now on it means all the different divisions will operate separately," says Aidan Foster-Carter. "I think that can only be good for South Korea."

The Lee family, however, is still expected to continue to control the business giant.

Link to impeached president

This scandal comes at a difficult time for South Korea, after President Park Geun-Hye was recently impeached over a corruption scandal.

It also appears that Samsung had donated millions of euros to Choi Soon-Sil, the advisor to the President at the centre of the scandal.

Some say this may have been why Park approved a controversial merger in 2015 of two Samsung units.

"One case isn't enough to draw conclusions but I think it reflects the current political climate", explains Robert Dujarric, the head of the Institute for Asians Studies at Temple University in Japan. "The establishment, as in many other countries, has taken a hit."

President Park was heard by the Constitutional Court in Seoul earlier this week. The court is set to decide in March whether to approve her removal from office.

"We could get an election quite soon," says Aidan Foster-Carter. "The front runner is the Minju Party, the democrat opposition. In sum, South Korea is very likely to swing left, in part because of President Park but also the seeming bribery and corruption allegations."

This might not be the last scandal to come out of South Korea. State prosecutors have said they could probe other conglomerates, including Hyundai Motor and retail giant Lotte Group.