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Samsung's Lee to Resign over Corruption Scandal
Samsung Chairman Lee Kun-Hee steps down from chairman post effective immediately on April 22, 2008.

Disgraced Samsung Group Chairman Lee Kun-hee said on April 22 he was stepping down as head of South Korea's largest business conglomerate, in a surprise move following his indictment last week on charges of tax evasion and breach of trust.

"Today, I decided to retire as chairman of Samsung," Lee said in a nationally televised press conference. "I would like to express my deepest apologies for causing great concerns to the public as a result of the special probe."

"Dear Samsung family, I pledged to make Samsung a top-class company some 20 years ago, but I'm really sorry for not living up to the promise," the stern-faced Lee said.

Since early this year, Samsung, known for its sleek mobile phones and flat-panel televisions worldwide, has been faced with the independent counsel probe into allegations of slush funds, bribery and shady intra-group transactions that helped the 66-year-old Lee pass control of the group to his only son, Jae-yong.

Corruption scandals at Samsung are common, but the special probe came as a major embarrassment for the Lee family because it was sparked by the group's former chief attorney Kim Yong-chul, who had publicly made a series of revelations along with a group of priests.

Samsung, which has some 200,000 employees in 59 affiliates, appeared to flounder in the absence of the charismatic chairman.

Shares of some Samsung affiliates tumbled on the news of the senior Lee's resignation. Samsung Corp., the group's trading arm, plunged 9.01 percent to 70,700 won and Samsung Securities fell 4.78 percent to 87,600 won.

However, Samsung Electronics, the group's crown jewel, rose 0.15 percent to 675,000 won. Samsung Electronics investors have long ignored the independent counsel probe.

Samsung Group Vice Chairman Lee Hak-soo said the post of group chairman would remain vacant and Lee Soo-bin, chairman of Samsung Life Insurance Co. will serve as a representative of the group if necessary.

As part of the management reform plans, Samsung said it would dismantle the group's powerful strategic planning office, a group of some 90 officials who have been accused of helping the chairman manage his hidden assets and transfer control of the group's management to his son.

Jae-yong will also step down as a chief customer officer of Samsung Electronics Co., the group officials said.

"After Chairman Lee Kun-hee steps down and the strategic planning office is closed, independent management will be made by affiliates," the vice chairman Lee told reporters.

"Chairman Lee expressed his intention to resign in early March," he said.

In 1991, the embattled Samsung chief inherited the group's control from his father, the late Samsung founder Lee Byung-chull.

Under his leadership, many economists say Samsung Electronics became the world's largest maker of computer memory chips and liquid crystal display screens for flat-panel televisions.

The group accounts for one-fifth of South Korea's exports and stock market and its tax payments represent some 10 percent of government income.

However, Samsung and the Lee family have been accused of involvement in murky deals for the father-to-son wealth transfer and of using money to peddle influence among the nation's establishment to reduce public criticism. Critics often dubbed South Korea the "republic of Samsung."

At the press conference, Vice Chairman Lee, who is called the closest confidant of the chairman, said he will also retire after "completing remaining works." The two Lees aren't related.

Last week, the independent counsel Cho Joon-woong said he found 4.5 trillion won (US$4.6 billion) of Chairman Lee's hidden assets in bank and stock accounts under the names of Samsung executives.

The probe also found Lee evaded taxes worth 112.8 billion won, but it dismissed allegations of slush fund creation and bribery.

Nine other Samsung executives, including Vice Chairman Lee, were also charged, but the independent counsel didn't arrest the Samsung chairman and the executives, saying it "would cause enormous management disruptions."
Samsung said it will try to use Lee's hidden assets in a "useful way" after paying taxes.

The reform plans will be completed by the end of June, the group said.
Some critics, however, remain skeptical over Samsung's reform plans.

"I don't think it's a complete reform measure because there is no visible plan to improve corporate governance," said Kim Young-hee, a lawyer at the Solidarity for Economic Reform, a civic group for minority shareholders.
If the Samsung chairman is found guilty, he could face a sentence of between five years to life in jail. However, few analysts believe that the chairman will serve a jail term, citing South Korean judges' track record of handing down lenient sentences to owners of the family-run business conglomerates called chaebol.

In 2005, Chey Tae-won, chairman of SK Group, received a three-year prison term for accounting fraud, but his term was suspended by a higher court.

More recently, Hyundai Motor Chairman Chung Mong-koo received a three-year jail term on embezzlement charges, but an appeals court suspended the term, citing his importance for the national economy.

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