Samsung Group, pension
fund offices raided in growing South Korea scandal
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[November 23, 2016]
By Joyce Lee
SEOUL
(Reuters) - South Korean prosecutors raided the offices of Samsung Group
on Wednesday, a prosecution official said, after media reports of
alleged links with a confidante of President Park Geun-hye who has been
indicted in an influence-peddling scandal.
Prosecutors also raided South Korea's largest pension fund, the National
Pension Service (NPS), an NPS spokeswoman said. The Yonhap news agency
reported that investigators were probing NPS's decision to approve the
$8 billion merger of Samsung C&T Corp and Cheil Industries last year.
The raids signaled that prosecutors are expanding their investigation
into allegations of influence-peddling in the corruption scandal that
has rocked Park's presidency over the relationship between the
government and big businesses.
NPS, the world's third-largest pension fund, has come under scrutiny by
the media and civic groups over its approval as a major shareholder of
the merger between two affiliates of Samsung Group, South Korea's
largest family-run conglomerate.
Its backing was seen as crucial to the success of the merger and some
South Korean media reports said its approval came under mysterious
circumstances.
A Samsung Group spokeswoman confirmed prosecution officials had visited
the group's headquarters but she could not provide further details. The
NPS spokeswoman declined to give further details.
Prosecutors raided four locations - the NPS headquarters, NPS Investment
Management office headquarters, Samsung Group offices and the office of
a former NPS investment management official - said a prosecution
official who was not authorized to speak to the media and declined to be
identified.
Park and her confidante, Choi Soon-sil, are under investigation for
allegedly improperly pressuring major conglomerates, including the
Samsung Group, to raise funds for foundations that backed Park's policy
of promoting the cultural and sports communities.
"DRAWBACKS TO BUSINESS"
Lee Young-ryeol, the senior prosecutor directing the probe, said on
Sunday 53 conglomerates, "fearing direct and indirect drawbacks to
business activities such as tax audits", were "coerced to contribute
funds" to the foundations.
Park Ju-gun, head of research firm CEO Score, said there was little
surprise that prosecutors were now seeking evidence in Samsung Group
offices about how the merger may have been influenced by the
conglomerate's contributions to the foundations.
The merger of the Samsung affiliates was approved by shareholders in
July 2015 and prosecutors said the two foundations involved were set up
in the following six months.
"This was expected. Due to the circumstances in this case, prosecutors
cannot help but be suspicious about the genuine intent behind the
donation, such as the timing," CEO Score's Park said.
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Choi Soon-sil arrives for questioning at a prosecutor's office in
Seoul, South Korea, November 1, 2016. Kim Do-hoon/Yonhap via
REUTERS/File photo
President Park, through her lawyer, has pushed back on a request by
prosecutors to question her about the case, potentially the first time a
sitting South Korean president would be interrogated in a criminal case.
Park, who's five-year term ends in February 2018, has resisted calls to
resign but has apologized twice, saying she only sought to benefit the
economy and not herself, but acknowledges carelessness in her ties with
Choi.
However, the growing calls for her to resign and Park's virtual
withdrawal from public activities has left a worrying power vacuum in
South Korea.
Choi and former presidential aide An Chong-bum were indicted on Sunday
and charged with abuse of power, a major blow to the president's fight
for political survival.
NPS has defended its decision in the face of criticism that the deal
helped the Samsung Group family to cement control of the merged firms at
the expense of other shareholders.
"The reason we approved the merger was due to taking a comprehensive
view of the merger's synergy effect and potential for stock value
increase," it said in a statement last week.
There were "special circumstances" where NPS-owned stakes in both firms
were valued at a similar amount, it said. The size of NPS' combined
stakes in both firms was about 2.4 trillion won ($2.05 billion), or 3
percent of NPS' domestic stock portfolio.
However, according to records of the NPS Investment Office committee's
decision to back the merger in July 2015, acquired by an opposition
lawmaker and seen by Reuters, the NPS had calculated a merger ratio of
1:0.46 of Cheil Industries shares to Samsung C&T shares, based on its
valuations of the two firms.
This differed from Samsung Group's proposed ratio of 1:0.35, which the
NPS committee noted was comparatively unfavorable to Samsung C&T
shareholders.
(Additional reporting by Cynthia Kim, Yun Hwan Chae and Ju-min Park;
Writing by Jack Kim; Editing by Stephen Coates and Paul Tait)
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