NPS, Samsung offices raided in growing probe

Prosecutors raided the National Pension Service (NPS) and Samsung Group’s strategic planning office on Wednesday as part of an investigation into whether the Blue House coerced the public pension fund to approve a merger at the country’s largest conglomerate last year.

Authorities surmise that President Park Geun-hye might have ordered the NPS to allow the merger between Samsung C&T Corporation and Cheil Industries in return for Samsung’s hefty donations to two foundations allegedly controlled by Park’s longtime friend, Choi Soon-sil.

Samsung C&T Corporation is a construction and trading company that deals with global engineering projects and overseas sales operations. Cheil Industries is a textile firm. Both are Samsung affiliates.

The NPS was the largest stakeholder of Samsung C&T, reportedly owning an 11.6 percent stake. At Cheil Industries, it held a 5 percent stake.

The pension fund’s decision last year to approve the merger deal baffled many industry insiders who thought it would be self-detrimental, predicting the value of its stake in the merged entity to fall by hundreds of millions of dollars.

For Lee Jae-yong, vice chairman of Samsung Electronics, the deal was meant to consolidate his control over the family business.

Prosecutors are now wondering whether the president abused her authority by forcing the NPS to give the deal the green light so that her friend Choi could receive 20.4 billion won ($17.3 million) from Samsung through the Mi-R and K-Sports foundations. Samsung also sponsored a youth winter sports center allegedly controlled by Choi’s niece with a payment of 1.6 billion won.

Another allegation is that Samsung spent 3.5 billion won on Choi’s daughter, Chung Yoo-ra, a dressage athlete, so that she could purchase a horse and receive training lessons.

If prosecutors prove that the president meddled in the merger deal, it would mean she committed third-party bribery, which carries a minimum 10-year sentence.

On Wednesday, prosecutors raided NPS offices in Gangnam District, southern Seoul, and also in Jeonju, North Jeolla, to collect documents related to the merger deal, computer hard disks and cell phones. Samsung’s strategic planning office in Seocho District, southern Seoul, which is known as the conglomerate’s brain trust for business plans, was also raided for similar evidence.

Prosecutors said they would soon summon Moon Hyung-pyo, former minister of health and welfare, and Hong Wan-sun, former chief investment officer of the NPS, for questioning.

It was the third time Samsung was raided in the so-called Choi-gate scandal, after prosecutors combed through Samsung Electronics offices in Seocho District for evidence that it transferred 3.5 billion won to a German shell company created by Choi, Widec Sports, for the purpose of sponsoring Choi’s daughter. Prosecutors are looking into whether Samsung sent the money to Choi in the hope of receiving business favors from President Park, such as pressuring the NPS to approve its merger deal.

Samsung is just one of many Korean businesses that have found themselves wrapped up in the Choi-gate scandal when it was revealed that the Mi-R and K-Sports foundations amassed a staggering 77.4 billion won in the days after their launches. The Mi-R Foundation received 48.6 billion won in donations within two days of its launch in October 2015, while the K-Sports Foundation raised 28.8 billion won within six days of its launch in January.

The foundations are suspected to be slush funds intended for the president after she leaves office in February 2018. At least 53 conglomerates made financial contributions, including Samsung, LG, CJ, SK and Hanwha. Their chief executives were summoned by prosecutors earlier this month to answer questions about their involvement in the bribery allegations.

On Sunday, when prosecutors announced interim results of the investigation into the Choi scandal, they said they would drop the bribery charges for now because it appears that the companies made donations out of fear of repercussions, such as tax probes or possible rejections of business permits and licenses.

The latest raid on Samsung, however, indicates the prosecution is still leaving the possibility of bribery charges open.

BY LEE SUNG-EUN [lee.sungeun@joongang.co.kr]