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(5th LD) Woes mount for Samsung amid fresh allegation of massive accounting fraud
SEOUL, Nov. 27 (Yonhap) -- Woes are deepening for scandal-scarred Samsung Group, South Korea's biggest family-run business empire, after its former chief legal advisor made fresh allegations of multi-billion-dollar bookkeeping fraud by the group's affiliates.
Samsung's five affiliates, including Samsung Heavy Industries Co., Samsung Engineering Co. and Samsung Corp., used improper accounting methods to create more than 7 trillion won (US$7.5 billion) in slush funds by 2000, the former Samsung executive Kim Yong-chul said in a nationally-televised news conference on Monday, his fourth such revelation this month.
Kim says he is publicizing Samsung's corporate wrongdoing so that law enforcement authorities will fairly investigate the allegations.
Earlier, Kim accused Samsung of regularly bribing prosecutors, judges, high-ranking government officials, journalists and scholars to deflect criticism over the group's illicit stock deals to transfer ownership of the group from its chairman to his son.
"I worked over eight years in Samsung's core department and I know what Samsung's irregularities are," Kim said in an interview with MBC radio on Tuesday.
He urged prosecutors to thoroughly look into the allegations so they can beat "a force mixed with injustice."
On Monday, Kim released three Samsung documents to back up his claims.
One of the documents, viewed by Yonhap News Agency, showed Samsung Electronics Co., the group's mainstay and the world's largest maker of computer memory chips, gave 40 billion won worth of non-budget funds via an intra-group supply contract to the group's former aerospace unit, which changed its name to Samsung Techwin Co.
Other documents showed Samsung Corp., the group's trading arm, created more than 200 billion won after cooking its books in 1994 to divert the money to an affiliate now known as Samsung SDI Co.
They also alleged that the wife of Samsung Group Chairman Lee Kun-hee diverted more than 60 billion won to buy "expensive artwork."
In a statement, Samsung repeated its denial of the allegations made by Kim, saying they are just a repeat of "false, distorted and exaggerated claims."
"There should be no accounting fraud because accounting practices of Samsung affiliates follow a global standard," Samsung said.
Kim alleged that Samsung gave bribes to auditors of Samil PricewaterhouseCoopers, the South Korean affiliate of the world's largest accounting company, to cover up the bookkeeping shenanigans.
An official at Samil's Korean office, who spoke on the condition of anonymity, also denied the allegation, saying it would consider taking legal action against Kim.
"The documents offer the most detailed picture to date of the allegations surrounding Samsung and the Lee family," said Kim Sang-jo, a professor at Hansung University, who leads the civic group Solidarity for Economic Reform.
Shares of most Samsung affiliates tumbled on Tuesday but recovered some losses, with some analysts saying investor concerns were growing after the allegation of accounting fraud.
Samsung Electronics fell 4.26 percent to close at 539,000 won, Samsung Heavy slipped 0.49 percent to 40,650 won and Samsung Corp. declined 2.05 percent to 62,000 won on the Seoul bourse, compared with a 0.24 percent rise in the benchmark stock index.
"Investors remain jittery over the prolonged scandal at Samsung amid new allegations of accounting fraud," said an analyst at a local brokerage, who asked not to be named.
In the wake of Kim's first accusation earlier this month, two civic groups lodged a request for a criminal investigation into the Samsung allegations.
On Monday, prosecutors banned nine Samsung executives, including Chairman Lee and the group's No. 2 executive Lee Hak-soo, from leaving the country.
Senior prosecutor Park Han-cheol, who leads a 55-member team for investigating the Samsung scandal, said he would conduct the probe swiftly.
"All the allegations are on the table," Park told reporters on Monday. "We won't consider any factor outside the investigation."
Separately, Samsung is facing an independent probe after the National Assembly voted last week to appoint special investigators to look into the Samsung Group.
On Tuesday, President Roh Moo-hyun accepted the National Assembly's demand for an independent probe into the Samsung allegations, ranging from bribery and illegal stock deals to unlawful transfers of wealth from Chairman Lee to his son.
"I decided not to veto the bill because people want to know the truth of the Samsung allegations," Roh said.
The special investigation, which could last until April next year, is expected to start late next month after the Dec. 19 presidential election.
State prosecutors began tracking bank accounts of Samsung executives as part of their probe. In addition, the Financial Supervisory Service said it has launched an investigation into Goodmorning Shinhan Securities Co. over an allegation that the brokerage opened bank accounts for Samsung without verifying the real names of the account holders. Kim said such illegal bank accounts were used to stash Samsung's slush funds.
As the scandal snowballed, Samsung is considering canceling a Dec. 5 event to commemorate the 20th anniversary of chairmanship by the Samsung boss Lee Kun-hee, a group official said.
On Nov. 19, the 65-year-old Lee was absent from a ceremony marking the 20th anniversary of the death of his father, Lee Byung-chull, who founded the Samsung empire nearly 70 years ago, citing a "serious cold and illness from fatigue."
"Every one of Kim's revelations is shocking," the nation's mass-circulation Chosun Ilbo said in an editorial on Tuesday. "Samsung may have to face not only the ethical and moral responsibilities but the legal consequences as well. That's why people are concerned about the situation at Samsung."
"Foreign investors may end up thinking that if Samsung is this corrupt, then other Korean businesses must be much the same," the newspaper said. "If Samsung's flagship electronics unit is impacted by this incident, Korea's economy could be harmed."
(END)
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