Ex-Samsung exec ties firm to DAS

Former Samsung Vice Chairman Lee Hak-soo has confessed that the conglomerate paid a hefty legal bill for a company owned by former President Lee Myung-bak’s brother at the request of the Blue House, prosecution sources said Sunday.

Lee was questioned by the Seoul Central District Prosecutors’ Office for 16 hours on Thursday. During the interrogation, prosecutors asked him why Samsung Electronics had paid legal fees for DAS, an auto-component manufacturer owned by the former president’s family, when it was pursuing a lawsuit in a U.S. court.

DAS is now owned by Lee Myung-bak’s elder brother, Lee Sang-eun, but the prosecution suspects it actually belongs to the former president and that he used it to raise massive slush funds.

According to the sources, Lee Hak-soo submitted a written statement to the prosecution saying the Blue House had demanded that the conglomerate pay DAS’s legal fees, and Chairman Lee Kun-hee approved the deal. The prosecution said Lee Hak-soo was involved in Samsung Electronics’ payments of $3.7 million to Akin Gump Strauss Hauer & Feld LLP, a major law firm, for its legal representation for DAS in a U.S. court from 2009 to 2011.

He reportedly told the prosecution that he had multiple consultations about the payments with Kim Baek-joon, then general affairs secretary of the Blue House. He also told the prosecution that he had some expectation that then President Lee would grant Chairman Lee a special pardon. Akin Gump has represented Samsung Electronics in the United States since 1998.

In 2000, DAS invested 19 billion won ($17.61 million) into BBK, an investment firm established by Kim Kyung-joon, the former president’s ex-business partner. But BBK lost its license in 2001 for committing massive financial fraud, and DAS retrieved only 5 billion won from Kim.

In 2003, DAS filed a civil suit against Kim in a California court to collect the remaining 14 billion won. Making no tangible progress, DAS hired Akin Gump in 2009. In February 2011, DAS received 14 billion won from Kim through his personal bank account in Switzerland.

The former president was accused of abusing his power to collect DAS’s investment from BBK before small private investors retrieved their money through a civil suit. During the probe into the allegation, the prosecution recently discovered the link between Samsung Electronics and DAS. According to the former Samsung vice chairman, the conglomerate’s discussion with the Blue House in 2009 included the possibility of a special pardon for Chairman Lee, who had been convicted for massive financial crime at the time.

The Lee administration granted the special pardon on Dec. 31, 2009. No other convict was pardoned at the time. The Blue House said at the time the tycoon was pardoned to reinstate his membership on the International Olympic Committee in order to help Korea win its bid for the 2018 PyeongChang Winter Olympics.

Chairman Lee was sentenced to a three-year suspended jail term and fined 110 billion won for illegal bond dealings. During his 2008 trial, the tycoon voluntarily rescinded his rights and duties as an IOC member.

The prosecution believes a bribery charge can be applied to Samsung’s payment of DAS’s legal fees. “Why did Samsung pay for DAS’s legal fees when they have no business relations at all?” a prosecution official asked. “This investigation is a bribery investigation involving public servants.”

The former president denied the allegation. “He was never involved in DAS’s lawsuit in the United States,” the former president’s office said in a press release. “Linking the case to Chairman Lee’s special pardon is an unacceptable, malicious act.”

A Lee aide also said the former presidential secretary Kim was responsible for the legal fee case. “A Korean lawyer, who was a partner of Akin Gump, proposed free legal representation to DAS and Kim,” he said. “Later, he received payments from Samsung.”

BY KIM YOUNG-MIN, SER MYO-JA [ser.myoja@joongang.co.kr]