Samsung chairman Lee Kun Hee resigns

Financial scandal claims first victim

Simon Burns in Taipei, vnunet.com 22 Apr 2008

Samsung chairman Lee Kun Hee has said that he will resign to face charges of tax evasion and breach of fiduciary duty.

South Korean prosecutors have so far declined to detain Lee, claiming that the "enormous disruption" to Samsung could have a negative effect on the country's economy.

Senior Samsung executives bowed their heads before television cameras at a press conference as Lee apologised for "causing great public concern".

Samsung is among South Korea's leading companies and is one of the largest global manufacturers of hi-tech products including memory chips, LCD screens and mobile phones. The group has annual revenues in excess of $150bn.

"Twenty years ago, I promised to make Samsung into a top-class company," said Lee. "I am very sorry for not living up to that promise."

Lee, the son of the company's founder, took control of Samsung in the late 1980s.

Samsung's unusual corporate structure has been subjected to increasing scrutiny in recent years.

A complex multitude of cross-holdings still concentrates control in the hands of the founding family, despite huge outside investment.

Problems worsened for Samsung late last year when a former senior legal executive claimed that the company maintained a $205m slush fund to bribe officials and journalists. Prosecutors said that they had found no evidence of bribery.

Lee was convicted in the mid-1990s of giving bribes to two of South Korea's former presidents, but received a presidential pardon and returned to run the company.

Some of Samsung's dubious financial manoeuvring has been designed to pass control of the company to Lee's 40 year-old son Lee Jae-yong, the prosecutors allege.

The younger Lee has also resigned from his senior position at Samsung Electronics, local media reported.