beyondbrics

South Korea is getting back to business as usual, with prosecutors bursting into the offices of a chaebol (conglomerate) to investigate alleged skullduggery. This time SK, the energy group, had the uninvited visitors.

The investigations hinge on whether Chey Tae-won, the chairman, who has already spent time in jail for corruption, has been improperly tapping company funds for his loss-making investments in futures. SK denies the charge that company money has been misused but says it will co-operate with the prosecutors.

Whatever happens next, the raid heaps more bad press on the Chey family. A full investigation could also bite Lee Myung-bak, Korea’s pro-chaebol president, who has been keen to pardon corporate bosses such as Chey for their previous crimes.

The Cheys’ reputation hit rock bottom in February when Chey Chul-won, Chey Tae-won’s cousin, received an 18-month jail term for repeatedly smashing a baseball bat into a man who was protesting outside SK’s headquarters.

Chey Tae-won himself in 2003 served a few months of a three year jail term for a $1.2bn accounting fraud. The conviction did not stop him returning to head the company.  He received a presidential pardon and was appointed by the president to a key business ambassador role before last year’s G20 summit in Seoul, hoping to clean his slate.

Raids are common in South Korea and do not necessarily lead to charges or sentences. In many ways, they are an easy option for the authorities. Raids allow the authorities to be seen to be doing something to appease political sentiment without the dangers of a long, embarrassing case against a major chaebol.

Lee Myung-bak must be hoping that this time Chey Tae-won is innocent. If not, the presidential pardon system will be exposed as farcical. South Korea’s political elite is woefully failing to persuade its own increasingly angry citizens that chaebol bosses are not above the law, so this case will be closely watched.

In this case, Chey’s alleged involvement means the stakes are high and it will be hard to brush the matter under the carpet. It will be a test case for corporate responsibility and the presidential protection of big business.

Related reading
South Korea to pardon businessmen, FT
Hyundai and the ghost of crony capitalism, beyondbrics