Bribery Charges

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Case Studies – Choose ONE for Task 2
1. Samsung boss’ retrial for bribery charges begins
The retrial of Samsung Group’s de facto leader for bribery charges started in South
Korea on Friday.
Samsung Electronics vice chairman, JY Lee, appeared at an appellate court in Seoul
and said to reporters “he wanted to apologise for causing worries” before entering to
attend the first hearing for the trial. He made no further comments.
It’s his first court appearance in nearly two years since he was freed from prison in
early 2018.
Charges against Lee for bribery arose during a national scandal in 2016 that involved
the then-South Korean President, Park Geun-hye, who was accused of abusing her
power and receiving bribes from conglomerates via a close aide. She was eventually
impeached and jailed.
The Samsung boss and executives of the company were accused of giving bribes in
the form of money and horses to Park’s aide in return for government support for a
controversial merger of two business group affiliates.
In August, South Korea’s top court found that the appellate court had wrongly
dismissed the bribery charges against Lee that were in relation to Samsung giving
three horses to the now ousted Park’s confidant Choi Soon-sil. The top court then
ordered a retrial of the bribery charges.
Following the order, the South Korean tech giant issued a rare statement, saying it
“deeply regrets that this case has created concerns across the society. We will renew
our commitment to carrying out the role of a responsible corporate citizen and will
avoid a recurrence of past mistakes.”
Due to the Supreme Court’s decision, Lee could potentially face a heavier sentence
than previously due to an increase in the total monetary value of what is deemed as a
bribe under criminal law.
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The Samsung boss was arrested back in 2017. He was initially found guilty and
sentenced to five years in prison at the district court, but in 2018, he was freed by an
appellate court as it did not accept the validity of some pieces of evidence which led
to Lee receiving a suspended sentence instead.
Since leaving prison, Lee has been busy making “big moves” and large investment
decisions. In July, he visited Tokyo to meet with Japanese business leaders
amid rising trade tensions between South Korea and Japan over past historical
conflict.
Samsung Electronics announced in late 2018 that it would invest $22 billion into AI
and 5G by 2020. Meanwhile, Samsung Display earlier this month announced that it
had plans to invest $11 billion in to QD displays by 2025.
Prior to his sentencing, Lee had been leading the conglomerate since 2014 after his
father and Samsung patriarch, chairman Lee Kun-hee, suffered a heart attack and
was hospitalised.
2. Kobe Steel, Mitsubishi Materials, and Japan’s Corporate
Governance Woes
Japan’s economy notched its longest GDP growth streak since 2001 in the third
quarter of 2017. But underlying it’s steady recovery: A wave of quality-faking
admissions from some of Japan’s biggest companies that’s has raised questions
about the country’s standing as a manufacturing powerhouse.
In October, Kobe Steel revealed that it falsified information on some items sold
to Boeing, Ford, Toyota, and others since 2007; Mitsubishi Materials, which said
it faked data on auto and airplane parts affecting some 274 clients; and Toray,
a manufacturing giant that revealed that it had fudged data for cords used to
reinforce tires since 2008.
Carmakers Nissan and Subaru also recalled 1.2 million and 395,000 vehicles
respectively in 2017, saying unqualified inspectors were allowed to vet their cars
in the final checks for decades.
While the scandals haven’t revealed any major safety issues, they are negative
for Japanese businesses. As lower cost alternatives from China and South
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Korea have proliferated through the market, Japan has competed mainly by
pointing to the high quality of its products as a bulwark.
Analysts, though, say the series of scandals that have come out in recent months
suggest that those Japanese quality standards may have been set too high.
3. Equifax’s Data Breaches
Credit rating firm Equifax makes its profits from selling personal, often sensitive
information to financial institutions and lenders.
But in September, it revealed that it had been at the centre of one of the worst
data breaches in history, with the information of some 145 million people, about
half of the U.S. population, compromised.
In the aftermath, CEO Richard Smith stepped down, as well as its chief
information officer and chief security officer, amid revelations that Equifax was
aware of the system flaw that the hackers took advantage of since March. Then,
when the hack did happen, the firm waited a full two months before disclosing
it.
Meanwhile, the Justice Department is reportedly looking into whether top
Equifax executives committed insider trading when selling some $1.8 billion in
shares just before the breach was disclosed.
4. Uber, Uber, and More Uber
If Uber’s past run-ins with the law were speed bumps, then 2017 hit the ridehailing company like a 10-car pileup, with sexual harassment allegations,
questions about founder Travis Kalanick’s leadership, and criminal probes. In
February, former Uber employee Susan Fowler came forward alleging a culture
of sexual harassment in the Silicon Valley giant. In May, the Justice Department
revealed a criminal probe into Uber’s alleged use of a software dubbed
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“Greyball” to avoid regulators in geographic regions where it was operating
illegally. That all helped lead to the ouster of Kalanick in June, giving thenExpedia CEO Dara Khosrowshahi the unenviable task of reforming the firm.
What made it seem like even more of a Sisyphean ordeal: Shortly after
Khosrowshahi took the reins, London banned Uber from the U.K. capital, and in
November, it was revealed that Uber had been hacked, putting the data of
some 57 million users in danger.
Unlike in the case of United Airlines, Uber’s users have chosen alternatives to
the black cars. Due to its ongoing woes, Uber has ceded part of its market share
to Lyft, now controlling 74% of the U.S. market against 84% last year.
Uber once had a valuation of about $68 billion. Japanese banking firm SoftBank
meanwhile bought a stake in the company valuing it at $48 billion.
5. Alphabet and Facebook
The year following the presidential election became one for Congress — and
internet titans — to rethink their role in the democratic process.
Amid speculation that fake news spread on social media may have influenced
the 2016 elections, giants such as Facebook and Google appeared to dismiss
the possibility.
But that changed in 2017, with Facebook and Google — which derive a major
chunk of their revenue from ad placements — both saying that they had found
accounts tied to the Russian government. Facebook reported some 3,000
Kremlin-linked ads aimed at dividing the country that had been bought on its
platform. Google, meanwhile, found tens of thousands of ads bought by Russialinked entities on YouTube and Gmail. Twitter also revealed that a news outlet
paid for by the Russian government, Russia Today, had spent $274,000 in ads
on the platform in 2016.
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There’s no indication that the questions will stop any time soon. Twitter,
Facebook, and Google are still investigating how much Russian activity there
had been on their platforms. Adding to big tech’s big problems: Congress
appears to be taking a harder stance against the sector, with some on Capitol
Hill questioning the way they are getting users to keep coming back.
6. Wells Fargo’s Woes Continue
After losing the trust of consumers in 2016 for creating millions of fake
accounts, Wells Fargo struggled mightily to win back its customer base with
promises of transparency and reform.
But Wells Fargo’s woes only deepened in 2017, when the company admitted
that it had charged as many as 570,000 consumers for auto insurance that they
did not need. Additionally, some 20,000 of those borrowers may have had their
cars repossessed as a result. Wells Fargo said it would pay $80 million in
remediation. Wells Fargo’s head of consumer banking and some 70 senior
managers in the bank’s retail banking segment were also cut as a result.
In the same year, Wells Fargo also revealed that it had uncovered an
additional 1.4 million fake accounts on top of the 2.1 million the bank previously
disclosed had been created without consumer permission.
7. Apple’s Slowed Down iPhones
The tech giant’s year ended with a bang, after reports that Apple had
purposely slowed down older iPhones to compensate for decaying batteries.
It appeared to feed into a long-time conspiracy theory among some Apple
users: that the company had been purposely slowing down old models when a
new version came out in a bid to force consumers to upgrade. Now, the
company is facing lawsuits for allegedly slowing down the devices without first
warning consumers.
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In response, Apple has apologized for slowing down the iPhones, calling it a
“misunderstanding,” and offered to sell battery replacements for $29 instead of
the usual $79. Apple has said that once the battery is replaced, the iPhone’s
speed will pick up again.
8. Samsung’s Bribery Charges
In 2016, Samsung dealt with exploding Note 7 batteries. In 2017, it was
imploding corporate ranks.
Originally planning to put heir Lee Jae-yong at the head of the empire, the familyrun Samsung conglomerate is now facing questions of succession after Lee was
caught in a sprawling political scandal that took down former South Korean
President Park Guen-hye.
Lee Jae-yong is now facing five years (and potentially 12) in jail for offering
allegedly offering bribes to Park, embezzlement, and hiding assets overseas.
Samsung Electronics co-CEO Kwon Oh-hyun meanwhile also resigned in
October, citing Samsung’s leadership woes.
“As we are confronted with unprecedented crisis inside out, I believe that time
has now come for the company [to] start anew, with a new spirit and young
leadership to better respond to challenges arising from the rapidly changing IT
industry,” he said in a statement.
While Samsung’s long-term health is still on shaky ground, the company’s nearterm outlook belies those worries. The company posted record-breaking profits
in the third quarter of $12.8 billion, almost triple the number it posted a year
earlier.
Source: 10 Biggest Corporate Scandals, https://fortune.com/2017/12/31/biggestcorporate-scandals-misconduct-2017-pr/ [accessed on 22/02/2021].