SOUTH KOREA’S POLITICAL LEADERS’ reforms were tested again when, in
July 2018, Elliott Management, the New York–based hedge fund, filed for
arbitration against the South Korean government. It sought $718 million in
damages for political interference in the 2015 Samsung merger—the
merger that hurt shareholders and led to the arrest of Jay Lee and the
downfall of President Park Geun-hye.
“As Elliott’s claims are groundless, we view that we don’t have a liability
to pay compensation for any damages,” a justice ministry spokesperson told
the Financial Times.
“It is baffling that the Republic [of Korea] is currently calling claims of
fraud and discrimination ‘groundless’ while actively continuing an
investigation that shows further proof of the very fraud they are calling
‘groundless,’ ” an Elliott representative wrote to me.
The government needed Samsung to build manufacturing plants and to
invest for the South Korean economy, and Samsung appeared to be seeking
government support in hard times. In September 2018, President Moon
traveled to North Korea for a diplomatic summit with the dictator Kim
Jong Un. Accompanying the South Korean president was none other than
Jay Lee—despite his two-and-a-half-year suspended prison sentence, and
four-year probation—alongside almost a dozen other business leaders.
As per South Korean business tradition, Jay Lee’s criminal conviction
seemed to be of little importance to political leaders, as long as he and his
company helped the national interest.
“Along with becoming a regular fixture at government events, Lee has
also appeared at more than 10 public events both in the country and
overseas over the past year,” the Hankyoreh newspaper later wrote.
“Most people in the business community think that Lee has gotten his
mojo back.”
—
MEANWHILE, FINANCIAL INVESTIGATORS PROBED irregularities at
Samsung BioLogics—a biopharmaceutical company billed as Samsung’s
next growth engine—that dated all the way back to 2015.
Investigators believed Samsung BioLogics had changed its bookkeeping
methods to inflate the value of its stake in Samsung Bioepis, another
pharmaceutical company and a partner. As a result, its valuation of