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By Choe Sang-Hun
March 25, 2010 03:38AM
Ex-con Lee Kun-hee returns to head Samsung. Photo: REUTERS

Lee Kun-hee, a tycoon convicted of corruption last August but pardoned by President Lee Myung-bak four months later to help South Korea campaign for the 2018 Winter Olympics, returned to the helm of Samsung Electronics on Wednesday.

He was the latest and most prominent in a series of ex-convicts who have retained top management of major conglomerates in the country.

The Samsung Group is the largest of those, and in announcing Mr. Lee's surprise comeback, it said the chairman will bring to its electronics subsidiary and to the conglomerate as a whole badly needed leadership at a time when global businesses like Toyota were tottering.

Not all South Koreans were convinced.
“This only proves how unreasonable Samsung can be,” said Kim Sang-jo, an economist at Hansung University and executive director of Solidarity for Economic Reform, a civic group. “His return only makes Samsung more vulnerable to the kind of risk Toyota faces. It shows how distorted and how closed its decision-making is. It shows Samsung's lack of a mechanism to deal with errors.”

Mr. Lee's return
The manner of Mr. Lee's return – as disclosed by a senior vice president and top Samsung spokesman, Rhee In-yong – spoke volumes not only about the power the taciturn chairman wielded at Samsung but also about that of other “owner chairmen” like him at their own family-controlled conglomerates, known in the country as chaebol.

Top executives of Samsung affiliates, all aides loyal to the Lee family, conferred twice in February as Toyota was dealing with its car recall crisis, the spokesman told reporters. The executives were worried and decided to appeal to Mr. Lee to come back with his “seasoned management skills and leadership.” Then, on February 24, the most senior of them, Lee Su-bin, chairman of the top life insurer Samsung Life, visited Mr. Lee.

“I will think about it,” Mr. Lee told the envoy, according to the spokesman. After a month of deliberation, Mr. Lee finally agreed to retake the chairmanship of Samsung Electronics, the mother ship of the Samsung fleet.

'It's crisis time'
In addition, the way Mr. Lee justified his return typified the reasoning that other convicted tycoons have used to ignore public outcry and regain management positions. It is also the reason that many courts of law have offered to an increasingly skeptical public to explain lenient sentences given top executives convicted of crimes. They have all said, “It's a crisis time.” “Now is the real crisis,” Mr. Lee said Wednesday in a rare comment released by Samsung. “Top global companies are collapsing. You never know what might happen to Samsung and when. The lines of business and products Samsung now represents will be gone within the next 10 years. We have to start over again. There is no time to lose. Let's focus and march ahead.” Civic groups that have campaigned for more transparency and accountability from the nation's top business families were not impressed.

“We are back to business as usual. With Lee Kun-hee back, we fear that Samsung is back to its premodern and imperial management style,” said Kim Keon-ho, an official at the Citizens' Coalition for Economic Justice. Under the “imperial” management system symbolised by the Lee family, “vassal” executives work only for the best interests of the owner families, not for the shareholders as a whole, Mr. Kim said.

Corruption scandal
Mr. Lee, 68 – whose father founded Samsung in 1938 – headed the company for more than two decades until he stepped down in April 2008 amid scandal.

The group's former chief legal counsel, Kim Yong-chul, had asserted that Samsung kept a stash of secret funds and ran a network of bribery. Mr. Lee also faced allegations that he had helped his son, Lee Jae-yong, buy shares of major subsidiaries at unfairly low prices as part of a plan to hand over control of Samsung to the younger Mr. Lee.

After an investigation that critics called a whitewash, prosecutors said they had found no evidence of bribery. But they indicted Mr. Lee on charges of evading taxes on 4.5 trillion won, or $4 billion, by hiding the money in stock accounts under the names of aides. In a Supreme Court ruling last year, he received a suspended three-year prison sentence for tax evasion and breach of trust.

He also was ordered to pay 45.6 billion won in back taxes and 110 billion won in fines.

In December, President Lee granted him a pardon so that he could retain his membership on the International Olympic Committee and lead a campaign by the South Korean city of PyeongChang to host the 2018 Winter Olympics.

About the same time, Mr. Lee's son was promoted to become chief operating officer of Samsung Electronics, South Korea's biggest company and a top global maker of computer chips, cell phones and TV sets.

Mr. Lee and his son remain the largest individual shareholders.

New York Times