Leadership Crisis Deepens for Olympic Sponsor Samsung

(ATR) The man at the top of Samsung is in a Seoul jail cell after his arrest in connection with a massive bribery scandal.

Jay Lee, vice chair of Samsung Group, is being held for questioning over tens of millions of dollars he allegedly paid to win favors for the company from the Korean government.

He is alleged to have paid more than $37 million to a friend of Korean President Geun Hye Park, who now faces impeachment because of the scandal. Park’s friend, who prosecutors accuse of playing the role of bag woman, collecting bribes from numerous companies, is jailed and facing charges.

Lee has denied wrongdoing and has not been charged with any crimes. Korean law does allow for the arrest of persons under suspicion while investigations are pursued. Lee, 48, has been in the glare of prosecutors for months now. The past week in Seoul he’s faced dozens of hours of questioning while two separate courts took a whack at making a decision on whether Lee should be jailed.

After hanging out all night at the Seoul courthouse waiting for a decision, he turned himself in to police early the morning of Feb. 17 when he got the word he would be arrested.

Lee is the biggest fish snagged so far in the inquiry, the head of the country’s largest conglomerate. Samsung is a worldwide symbol of South Korea economic might. There isn’t a corner of the world that’s untouched by the Samsung brand.

The company has been a worldwide Olympic sponsor for nearly 20 years. In recent years Jay Lee has overseen the sponsorship and negotiations for its current deal with the IOC that runs until 2020.

While Lee’s problems are not linked to the Olympics, for organizers of the PyeongChang 2018 Winter Olympics, as well as the IOC, the timing of this could not be worse. With less than a year to the Games, Samsung promotion and activation is still being counted upon to boost worldwide and domestic interest in these first Winter Olympics in SouthKorea. But with the executive who has driven the Olympic program now in jail and possible facing years more in prison, planning for PyeongChang 2018 seems the least of Jay Lee’s worries.

Lee took over as the head of the Samsung Group more than two years ago when his father, Samsung chair Kun Hee Lee, became incapacitated from a heart attack. The elder Lee, now 75, launched Samsung’s long relationship with the Olympics and was elected as an IOC member in 1996. His illness has prevented him from attending at least three IOC sessions in a row. A decade ago Lee faced criminal charges involving financial manipulations and was found guilty, but managed to avoid jail. He was suspended from his IOC membership at the time.

Jay Lee can be held for up to 10 days pending an indictment, but prosecutors can seek extensions of the detention order. He occupies a single cell at the Seoul prison, outfitted with a mattress on the floor, toilet, desk and TV. No word on whether it’s a Samsung.

Written and reported in Seoul by Ed Hula.

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