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Samsung Faces Embarrassing Legal Challenge

Posted by: Ihlwan Moon on November 6, 2007

Samsung is no stranger to legal battles. In recent years, the South Korean conglomerate has been brought to courtrooms, accused of patent infringements or price fixing for its products such as liquid crystal display panels and memory chips. Yet this week, it faced the most embarrassing, and potentially damaging, legal challenge, with a former attorney of the group accusing it of keeping secret slush funds to bribe prosecutors and bureaucrats regularly.

The attorney, Kim Yong Chul who worked as a legal executive at Samsung from 1997 to 2004, claims that he wants to blow the whistle on corruption and put an end to “wrongful” influences by the country’s conglomerates on the legal system and the overall society. He also says he repents for being an accomplice in covering up schemes aimed at transferring management control of Samsung from Chairman Lee Kun Hee to his son. Samsung denies all the allegations.

A fierce legal wrangling appears inevitable after a group of lawyers and a civic group filed a request with state prosecutors on Nov. 6 to open an official probe into Kim’s allegations, which Samsung describes as sheer fabrications. In October 2005 a Seoul court found two top Samsung Group executives guilty of conspiring in a 1996 deal to help Lee’s children buy a majority stake at discounts in the amusement park operator Everland, which is at the heart of a web of cross-shareholdings among group affiliates. The complicated cross-shareholdings make sure the Lee family controls the whole group with a small stake.

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