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This page is graphically intense with long load times due to photos. However, the photos and narratives by the men who served at Osan Air Base makes the wait well worthwhile. The opinions expressed are those of the author and in no way represents any official statement of Osan AB or the USAF.

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If you wish to listen to some golden oldies from 1940s-1990s, click on the selection on the list below. There are about 80 full-length songs to choose from. (NOTE: Song audio degraded due to space limitations, but adequate for computer listening.) Click For Music 1940s: Billie Holiday_As Time Goes By 1940s: Kate Smith_God Bless America 1940s: Mills Brothers_Glow Worm 1950s: Big Bopper_Chantilly Lace 1950s: Bill Haley Comets_Youre Never Too Old To Rock 1950s: Coasters_Yakety Yak 1950s: Danny And TheJuniors_At The Hop 1950s: Del Shannon_Handyman 1950s: Doris Day_By The Light Of The Silvery Moon 1950s: Fats Domino_I Hear You Knockin 1950s: Freddie Canon_Palisades Park 1950s: Nat King Cole_Ramblin Rose 1950s: Pat Boone_Love Letters In The Sand 1950s: Red Skelton_Pledge Of Allegiance 1950s: Ricky Nelson_Listen To The Rhythm Of The Falling Rain 1950s: Ritchie Valens_Boney Maronie 1950s: Ritchie Valens_Donna 1950s: Ritchie Valens_LaBamba 1960s: Beach Boys_Surfin USA 1960s: Beach Boys_Barbara Ann 1960s: Beatles_Strawberry Fields Forever 1960s: Bobby Vee_Go Away Little Girl 1960s: Chubby Checker_The Twist 1960s: Chuck Berry_Johnny Be Good 1960s: Crosby Stills Nash_Teach Your Children 1960s: Dean Martin_Make The World Go Away 1960s: Elvis Presley_Blue Suede Shoes 1960s: Elvis Presley_Love Me Tender 1960s: Harry Belafonte_Day O 1960s: James Darren_Goodbye Cruel World 1960s: Johnny Mathis_Chances Are 1960s: Kingsman_Louie Louie 1960s: Marcels_Blue Moon 1960s: Marvin Gaye_Lets Get It On 1960s: Paul Anka_Put Your Head On My Shoulder 1960s: Harry Belafonte_Day O 1960s: Righteous Brothers_Youve Lost That Loving Feeling 1960s: Johnny Mathis_Chances Are 1960s: Peter Paul Mary_The Marvelous Toy 1960s: Roy Orbison_Only The Lonely 1960s: Roy Orbison_Pretty Woman 1960s: Sam The Sham_Wooly Bully 1960s: Shirelles_Soldier Boy 1960s: Silhouettes_Get AJ ob 1960s: Simon And Garfunkel_Bridge Over Troubled Waters 1960s: Thunderbirds_Hippy Hippy Shake 1960s: Tony Bennett_San Francisco 1960s: Ventures_Apache 1970s: Bette Midler_The Rose 1970s: Cher_If I Could Turn Back Time 1970s: Commodores_Three Times A Lady 1970s: Crystal Gayle_Ill Do It All Over Again 1970s: Dione Warwick_Ill Never Love This Way Again 1970s: Engelbert Humperdink_Release Me 1950s: Fleetwoods_Mr Blue 1970s: Lovin Spoonful_Rain On The Roof 1970s: Mamas And Papas_Age Of Aquarius 1970s: Mamas And Papas_California Dreaming 1970s: Mamas And Papas_Monday Monday 1970s: Tina Turner_Whats Love Got To Do With It 1970s: Tony Orlando And Dawn_Tie A Yellow Ribbon 1970s: Troggs_Wild Thing 1980s: Aaron Neville Linda Ronstadt_All My Life 1980s: Bruce Springsteen_Born In The USA 1980s: Kenny Loggins_Footloose 1980s: Kim Carnes_Betty Davis Eyes 1980s: Kris Kristofferson_Loving Her Was Easier 1980s: Lee Greenwood_God Bless The USA 1980s: LindaRonstadt_Desperado 1980s: Linda Ronstadt_Thatll Be The Day 1980s: Marie Osmond Dan Seals_Meet Me In Montana 1980s: Michael Jackson_Billie Jean 1980s: Michael Jackson_You Are Not Alone 1980s: Michael Jackson And Friends_We Are The World 1980s: Michael Jackson_Ill Be There 1980s: Phil Collins_In The Air Tonight 1980s: Ricky Nelson_Garden Party 1980s: Ronnie Milsap_Lost In The 50s Tonight 1990s: Kenny G_Auld Lang Syne 1990s: Luther Vandross_Id Rather 1990s: Ricky Martin_Livin La Vida Loca Free JavaScripts provided by The JavaScript Source

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KOREA EVENTS 2006

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RETURN TO MAIN TABLE OF CONTENTS

BUSINESS, FINANCE AND LABOR EVENTS

January 2007

(SITE NOTE: Unfortunately, the rest of the FEZs in Korea have been a bust. The first point was that most companies found the land "deals" were too costly and preferred to lease lands. The second point was that the "incentives" were matched or exceeded by other countries attracting foreign direct investment. The third point was that the foreign companies complained that the infrastructure in Korea -- highways, education, housing, medical, etc. -- were inadequate or too expensive. The fourth point was that foreign companies complained that the ROK bureaucracy involved too much red tape and costly hassles -- including corruption. The fifth point was the Korean labor had proven to be to bothersome with its radical union strikes were a regular feature of labor negotiations -- resulting in lowered productivity and reduced profits. There were many other complaints but the biggest worry was the xenophobic business environment that showed that the ROK was nice in attracting business, but the business had better not turn a profit in Korea.

The big plus of the Pusan-Chinhae FEZ area is the world-class containerized port facilities something most of the other FEZs lack. For the rest of Korea's FEZ, the ROK can only offer promises with a lukewarm reception from foreign companies.)

(SITE NOTE: The bottomline is that chaebols have returned to the "good ol' days." The ruling Uri Party pushed for chaebol (conglomerate) reform, but the weakness of its parliamentary position made it difficult for the party to achieve radical change. In Nov 2006, Korea’s major chaebols received a bonus as the Roh administration backed more lenient regulatory governance as the government decided to ease the equity investment cap on conglomerates. In a reprieve for Korea’s conglomerate-owning families, the government decided not to ban circular intra-group shareholding by subsidiaries of big conglomerates -- and will even ease an investment cap whereby business groups with assets over W2 trillion cannot invest more than 25 percent of their net worth in affiliated and non-affiliated companies. (Source: Chosun Ilbo.)

The Asian Financial Crisis ("IMF Crisis") of 1997-1998 was brought about by the chaebols providing cross-assurances on bad loans to sinking affiliate companies -- and brought Korea to the brink of disaster. The financial crisis leveled South Korean financial markets and investors got a look at how dysfunctional the chaebol had become. Leveraging strong government support in the form of cheap credit, subsidies and protectionist trade practices, the chaebol spent decades investing in a broad range of industries.

Afterward the "IMF Crisis," the government took action -- at the insistence of the International Monetary Fund -- to rein in the chaebols and provide transparency to their actions. Now in 2007, it is back to business as usual. The laws put in place to restrict the chaebols are now being rolled back or eliminated. The chaebol structure allows founding families to retain control of the company's businesses -- even though they do not own majority stakes. A Morgan Stanley report published online in Oct 2006 noted that corporate governance reform may in fact be a necessity for the long-term future of surviving chaebol. In 2006, the Korean market was in the doldrums until activists like Icahn and Michael Milken "came in and started shaking things up with hostile takeovers and leveraged buyouts." (Source: International Herald Tribune.)

Suddenly the old boy network sprang up to block foreign managerial controls of chaebol firms or national monopolies (i.e., KT&G) -- working in concert to block Icahn and Milken. The entire xenophobic business environment started with the Sovereign fiasco then Lone Star fund; followed by Icahn and Milken who have been basically thwarted at every turn -- though with a minor success in getting one foreign director on the KT&G board.)

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Stealing from Kids: 4 ice cream makers fined 4.63 bln won for price fixing (Mar 2007) On 18 Mar Yonhap News reported that South Korea's antitrust watchdog said it had decided to fine four snack food makers a combined 4.63 billion won (US$4.9 million) for the fixing of prices of their ice cream products. Lotte Confectionery Co., Lotte Samkang Co., Haitai Confectionery Co. and Binggrae Co. were found to have colluded in raising the prices of their main ice cream products from 700 won to 1,000 won since May 2005, the Fair Trade Commission said. (SITE NOTE: Is nothing sacred? Ripping off little kids is terrible...)

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U.K. Paper Says Korean Economy In "Middle-Age Crisis" (Mar 2007) On 27 Mar it was reported in the London-based Financial Times that the Korean economy is suffering a "premature middle-age crisis". An editorial in the financial newspaper said, “Regrettably, President Roh Moo-hyun's administration has lacked both the vision and political courage to pursue vigorous reforms. However, the inauguration of Mr. Roh's successor and parliamentary elections next year offer an opportunity for a fresh start.” The editorial said, “Once held up as a model of precocious development, which rapidly transformed itself from an agricultural into an industrialized society, east Asia's third-largest economy is sinking into premature middle age.”

To back up its critical view, the FT pointed to the nation’s average economic growth of 4.2 percent over the past four years, "far below its potential." The newspaper also said that Korea’s xenophobia discourages foreign investment while domestic companies are moving their plants abroad as fast as possible. “This faltering performance is all the more surprising because Korea still possesses enviable assets. It has a well-educated population, modern infrastructure, a high level of Internet penetration and an industrious, if militant, workforce,” the editorial said. The article concluded with an optimistic note, saying, “History suggests that, with the right political leadership, Korea is quite capable of” transforming itself.

Unlike the FT, Seoul National University economics professor Lee Seung-hoon is pessimistic about Korea's next president. In a forum on national development, he criticized the presidential hopefuls for making populist campaign pledges and failing to take national development seriously. Prof. Lee called their campaign promises a tactic to appeal to a certain social class in a certain region. He cited a ceiling on prices of new apartments and the disclosure of private builders’ construction costs as the best examples. (Source: Chosun Ilbo.)

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April 2007

Eased rules for Chaebols balanced by disclosures (Apr 2007) Beginning in July, the Fair Trade Commission will hold large conglomerates to higher disclosure standards regarding their cross-affiliate investments, in exchange for loosening limits on such investments. When a company belonging to a business group with assets of 2 trillion won ($2.1 billion) or more wants to trade goods or services with an affiliate that is at least 50 percent owned by someone from the group founder’s family, commonly called chaebol, the company will have to obtain the approval of its board of directors and announce the trade at the Seoul stock market, the antitrust agency said on 16 Apr.

The regulation is intended to prevent top conglomerates from focusing their trades on and giving privileges to their affiliates, the antitrust agency explained. The new obligation will take effect in July at the same time that the investment cap on top conglomerates will be loosened.

Now, every affiliate of a business group with assets of 10 trillion won or more is banned from investing more than 40 percent of its assets in other companies. The ceiling was raised from 25 percent of net assets last year. The investment restriction will be loosened further in July, as the investment cap will be applied to only big affiliates with minimum assets of 2 trillion won. Then, only 27 large affiliates in seven major business groups, including Samsung Electronics Co. in the Samsung Group, will remain subject to the restriction. Now, 264 affiliates in 11 business groups are subject to the investment cap. (Source: Joongang Ilbo.) (SITE NOTE: How soon everyone forgets about what brought about the IMF Crisis of 1997-1998. The excessive cross-assurances and cross-financing within the chaebol groups in order to bolster failing companies nearly brought the country to its knees. However, that was a decade ago and the populace has forgotten about the rules forced on Korea by the International Monetary Fund in order to gain the necessary bailout funds. The Roh Moo-hyun and Uri Party started courting big business as the Presidential elections neared. Running a presidential campaign is expensive and the Uri Party war chest needed filling. The easing of the rules is a result. Only now the "transparency" issue is being claimed as a "balancer" to funds. Such is life in Korea -- where big business rules the roost.)

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First Current Account Deficit in 10 Years Predicted (Apr 2007) The current account balance for 2007 seems likely to swing to a deficit for the first time since the financial crisis of 1997. That's because the amount of money earned from exports is less than the amount of money spent overseas on dividend payouts, foreign travel and studying abroad, and that gap is widening.

On 26 Apr the Bank of Korea announced that the current account deficit for March reached US$1.49 billion (US$1=929). That puts the cumulative account balance for January to March at a shortfall of $1.52 billion. The main reason the current account balance swung to a deficit in March is because of a jump in local companies' overseas dividend payments. As companies closed their books for last year, their payments to overseas investors totaled $2.85 billion for the month. The income account, which is overseas dividend payments and wages earned by foreigners in Korea minus incoming dividends and wages earned by Koreans overseas, posted a deficit of $2.09 billion in March. The trade account, which is income from exports minus payouts for imports, rose to a surplus of $2.5 billion in March, down $400 million compared to last March.

Because overseas travel and studies increased this year, the cumulative service account deficit for January to March reached $6.1801 billion. That nearly balances out the cumulative trade surplus ($6.1807 billion), meaning most of the money earned from exports is flowing out of the country through overseas travel and studies.

The problem is that the current account deficit will probably get worse next month considering that most dividend payments are sent in April. Jeong Sam-yong, the head of the BOK's balance of payments statistics team, predicted that if the trade surplus continues, the current account balance will likely be a surplus of $2 billion for this year. However most private researchers are forecasting a current account deficit for the year. Samsung Economic Research Institute predicted a deficit of $1.3 billion, LG Economic Research Institute predicted a $1.2 billion deficit, and Hyundai Economic Research Institute predicted a $3 billion deficit.

Chang Jae-chul, a senior economist at Samsung Economic Research Institute said, "The travel account deficit is already more than $1 billion a month even though it's not the summer vacation season yet. And with exports of chips, cell phones and other major key products slowing, it looks like the current account balance is likely to swing to a deficit." (Source: Chosun Ilbo.)

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May 2007

U.S. Puts Korea on Intellectual Property Watch List AGAIN... (May 2007) The U.S. trade representative (USTR) on 30 Apr placed 43 countries including South Korea on a "watch list" of intellectual property rights abusers. Another 12 countries, including China and Russia, were put on a "priority watch list," indicating that intellectual property rights violations in those countries have reached serious proportions.

In its annual "Special 301 Report" released Monday, the USTR praised Korea for having agreed in the Korea-U.S. free trade agreement to step up protection of intellectual property rights, but it also said Korea will remain on the watch list for this year. Since 1989 the U.S. has classified countries into three categories based upon how seriously they enforce intellectual property rights: a "priority foreign country" list, the priority watch list, and the watch list or "Section 306 monitoring list." (SITE NOTE: From our perspective, the ROK simply does not care about enforcing intellectual property rights, but always makes a big fanfare presentation of its "crackdown" efforts -- that never last more than a month -- if that. The Korean consumers want their name brand rip-off products and the police know that. Korea used to be known for its thriving rip-off market -- and attracted special foreign shopping tours -- but the ROK clamped down on this trade when it attempted to join the WTO and OECD. The market simply went underground.)

In May 1989, Korea was placed on the priority watch list, but in November of that year it was lowered to the watch list along with Taiwan. Korea was again placed on the priority watch list in January 2004 but moved to the watch list the following year.

The USTR named 12 countries -- China, Russia, Argentina, Chile, Egypt, India, Israel, Lebanon, Thailand, Turkey, Ukraine, and Venezuela -- as the worst violators of American intellectual property rights. The USTR was especially concerned about China's violations of intellectual property and trademark rights.

On Russia, the USTR said, "The coming months will be a critical period, as Russia moves to implement a variety of legal and law enforcement improvements to which it committed as part of a bilateral agreement with the United States on Russia's eventual accession to the World Trade Organization (WTO)." U.S. Trade Representative Susan Schwab said, "We must defend ideas, inventions and creativity from rip off artists and thieves." (Source: Chosun Ilbo.)

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Housing Bubble Could Cause Economic Bust - Bloomberg (May 2007) In a column dated May 3, Andy Mukherjee, a Bloomberg columnist covering Asian economies, wrote, "South Korea can't afford to stab the housing bubble." The housing bubble may be deflating as overheated Korean home prices stabilize,” he wrote, but "the danger now is of unintentional overkill." He said Korea may be headed for an economic slump because of the housing bubble. If the real estate bubble deflates, the columnist wrote, over-leveraged households would face a credit crisis, consumption would decline, and Korea could fall into a long-term economic descent. (SITE NOTE: The ROK financial gurus still maintain that there is NO housing bubble -- only inflated prices due to speculative buying. In May, the ROK government was patting itself on the back as the rate of increase for housing prices continued to drop.)

The enormous interest burden on over-leveraged Korean consumers is the danger lurking behind the real estate bubble, he added. Quoting data from the Samsung Economic Research Institute, he said Korea's household credit-risk index "had a reading of 2.29 in the fourth quarter of 2006, the highest level since the peak of a credit-card bubble in the third quarter of 2002." "Rising real interest rates have accounted for more than a quarter of the deterioration in the home buyers' credit-risk profile," Mukherjee wrote. "If inflation perks up, possibly because of oil prices, the Bank of Korea may be forced to raise rates again. And that may distress households by simultaneously increasing their mortgage costs and causing the prices of their properties to fall."

Middle-class households that would be unable to withstand the impact of mortgage interests may put their upscale homes up for sale, Mukherjee said. "So is another crisis coming to Korea? It might depend on the central bank." He suggested "a third way," advising Korea not to hesitate between two choices -- stabilizing commodity prices or housing prices. Korea, he suggested, should follow in the footsteps of the U.S. Federal Reserve Board (FRB).

Traditionally the FRB has made forecasts about real estate and stock markets through its own economic review reports and media outlets, without directly intervening in asset prices. Mukherjee said, "The Bank of Korea brings out a Financial Stability Report twice a year. It isn't something that gets a lot of attention. And that needs to change. Warnings must be timely. The stability report should be turned into a quarterly." (Source: Chosun Ilbo and Korea Herald.)

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SEE ROK, EU Agree to Scrap 95 Percent of Tariffs on Goods in FTA Talks (May 2007) for on-going ROK-EU FTA Negotiations

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ROK National Competitiveness Inches Up, but nosedives in Economic Performance (May 2007) South Korea ranks 29th in competitiveness among 55 nations and regions this year, up three notches from last year, in rankings by the International Institute for Management Development released Wednesday. The Swiss institute annually ranks countries in terms of competitiveness in the "World Competitiveness Yearbook.” The IMD said South Korea inched up due to an improvement in government efficiency by 10 notches, from 41st in 2006 to 31st in 2007. The U.S. ranked top for the fifth consecutive year. Singapore and Hong Kong ranked second and third.

But Korea tumbled 13 notches in economic performance, from 36th to 49th, reflecting businesspeople's recession concerns. The IMD gave Korea’s economy a poor rating due to high prices of daily necessities and a low ratio of foreign direct investment to GDP. Last year, Korea ranked 32nd in global competitiveness, down five notches from 2005 (27th).

The IMD classified the 55 nations and regions into one group of 40 which are "closing the gap" with the U.S. and a group of 15 that are widening it. Korea is at the lower end of the first group. The frontrunners are China (15th), Russia (43rd), India (27th), Slovakia (34th), Estonia (22nd), Sweden (ninth), Austria (11th), Australia (12th), Denmark (fifth), Switzerland (sixth) and Hong Kong (third).

The institute predicts the rankings will soon change as the competitiveness of these countries improves. The group of 15 widening the gap with the U.S. includes Indonesia (54th), Italy (42nd), Argentina (51st), Brazil (49th), Mexico (47th), Turkey (48th), the Philippines (45th), and France (28th). Although they are still competitive in certain sectors, some will fall behind others unless they carry out thoroughgoing restructuring. (Source: Chosun Ilbo

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Korean Economy is Bottoming Out ... AGAIN (May 2007) The Korean economy is pulling itself out of a year-long economic slump on recovering domestic spending and will become stronger, but inflationary pressure may build up in the second half, the state-run Korea Development Institute (KDI) reported, on 10 May. In addition, stats show that consumer confidence is on the rise after a year of stagnation.


GDP Growth

The KDI predicted the economy will expand 4.4 percent this year from a year earlier as growing private consumption and corporate investment will offset a slowdown in exports. The latest growth forecast is the same with its projection made late last year. Korea's gross domestic product (GDP) had slowed since the first quarter of 2006 when the output grew 6.3 percent. The institute said despite slowing exports, recovering domestic demand and corporate spending are expected to lead stronger economic activities into the latter half of the year.

It raised its outlook on domestic consumption for this year, citing improving consumer sentiment over the past few months. According to the National Statistical Office (NSO), the index measuring consumer confidence in economic and living conditions for the next six months increased to 100.1 last month, marking the first rise above the benchmark since April 2006 when the index stood at 100.6.

It raised domestic consumption growth projection to 4.2 percent this year from the earlier prediction of 3.9 percent. Also, corporate investment is expected to jump 5.7 percent, up from the previous 4.8 percent forecast. But the institute downgraded export growth to 10.5 percent from 11.9 percent. Hyundai Research Institute (HRI) said that domestic demand will replace exports as the main growth engine this year as exports are forecast to slow amid a global economic slowdown, adding consumer spending will likely determine the extent of expansion this year. (Source: Korea Times.)

OECD voices concern over S. Korea's growth potential (Jun 2007) South Korea's economic potential may weaken due to widening economic polarization, an OECD report showed on 20 Jun, sounding an alarm for the future of Asia's third-largest economy. The report by the Organization for Economic Cooperation and Development (OECD) comes as concerns over the country's widening income gap and disparities among industries are mounting. (Source: Yonhap News.)

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Personal Bankruptcy Filings Surge: Up 250% from 2006 (May 2007) A range of indices reflecting people's livelihoods continues to paint a bleak picture even if the economy has recently shown signs of recovery on rising domestic consumption and corporate capital spending. According to the Supreme Court on 20 May, the number of bankruptcies filed by individuals reached 45,057 in the first quarter of the year, up 2.5 times from 17,679 over the same period last year. If the pace continues, the number of personal bankruptcies will record an all-time high this year, surpassing last year's total of 123,691.

Analysts say personal bankruptcies filed with the court have been increasing as more individuals apply for various debt workout programs operated by government agencies and financial service companies to reschedule their repayments. But they also say slow income growth and lackluster job creation amid worsening business conditions have aggravated household finances, pushing the number of individual bankruptcies higher.


Personal bankruptcy (2007)

``The rise in bankruptcy filings basically reflects stagnant income and job growth,'' said Song Tae-jung, senior economist at the LG Economic Research Institute. He said even though a series of recent economic indices, including manufacturing output and consumer sentiment, indicate the economy is gaining growth momentum, people, particularly those in the low-income bracket, are still grappling with financial hardship. ``It will take at least several more months for households to benefit from improving economic conditions.''

Major private research institutes have raised their economic outlook for the second half of the year on signs of recovery in domestic consumption and corporate capital spending. The Korea Development Institute (KDI) said it expects domestic consumption to increase 4.2 percent this year, up from an earlier prediction of 3.9 percent, adding that corporate investment will jump 5.7 percent, up from the previous 4.8 percent forecast. The Samsung Economic Research Institute (SERI) also raised its 2007 economic growth projection to 4.5 percent from 4.3 percent made late last year, while the Korea Economic Research Institute (KERI) raised its growth forecast to 4.4 percent from an earlier 4.1 percent, citing improving consumer sentiment.

According to the National Statistical Office (NSO), the index measuring consumer confidence in economic and living conditions for the next six months increased to 100.1 last month, marking the first rise above the benchmark since April 2006 when the index stood at 100.6. ``During an economic rebound, those in the high-income bracket tend to gain first, while poor households usually benefit last. But consumers' perceived economic benefits are not going to last long because their purchasing power will likely stagnate because of sluggish income and job gains amid rising consumer prices,'' Song said.

The number of new jobs created from January to April this year fell short of the government's target of between 350,000 and 400,000. Last month, the country generated about 278,000 new jobs, following 273,000 in March and 262,000 in February. In particularly, the number of jobs in the retail, restaurant and lodging sectors, which usually employ workers from the low-income bracket, fell 66,000 in April from a year ago, after a 32,000 drop in March.

At the same time, consumer prices increased at a faster pace this year with prices rising 2.5 percent in April from a year earlier, up from a 2.2 percent year-on-year gain in March and February. Particularly, prices for living necessities, including food and clothes, rose 2.9 percent, the highest increase since last September, amid rising prices of international oil and other raw materials. (Source: Korea Times.)

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A Former FTC Official Took Bribes Worth about 100 Million Won (May 2007) On May 23, Choi Jae-gyung, the head of special investigations in Seoul Central District Prosecutors’ Office, requested an arrest warrant for a former member of the standing committee of the Fair Trade Commission, Park (64), who allegedly took money from the JU group (about 130 million won) in exchange for aiding the multi-level marketing company while the FTC investigation had been ongoing against the group Prosecutors arrested another former official, A, who was involved in the bribery scandal in regards to the investigation of the Fair Trade Commission into the group.

It is the first time that a high level FTC official in charge of supervising pyramid selling has been arrested. Park has been charged with taking bribes of about 100 million won for “favorable treatment” when the group was under an FTC investigation of the group’s violations against overpayments for supporting allowances.

Prosecutors said Park made a formal contract with the group as a management adviser, but he was actually playing a role as a lobbyist in the FTC investigation into the JU company. Park has also been charged with taking 30 million won in response to the company’s request for amending some of clauses related to deduction fees when he was working as an executive for an interest group for the Korean multi-level union from December 2003 to January 2005. Park had served as an executive of the union after he worked as FTC project director, subcontracting director, and a member of its standing committee. (Source: Donga Ilbo.)

Court upholds conviction of 2 at Samsung (May 2007) An appeals court decided on 29 May to uphold the conviction of two senior executives at Samsung Group on charges of helping the only son of its reclusive chairman, Lee Kun Hee, inherit control of Samsung, the country's largest conglomerate in 1996. A suit was filed in 2000 by law professors. The seven-year legal battle surrounding Lee's 39-year-old son, Lee Jae Yong, was the most prominent among cases in which the chairmen at some of the country's family-controlled conglomerates were accused of masterminding dubious financial deals to help their sons inherit the corporate reins. Though the ruling upholds the convictions, Lee Jae Yong gets to keep his control of Everland due to the statute of limitations.

The following is from International Herald Tribune on 30 May 2007:

In an intensely monitored ruling, the Seoul High Court upheld a lower-court ruling from 2005 and increased penalties for the two convicted Samsung executives, Hur Tae Hak and Park Ro Bin. But it left unanswered whether the 65-year-old Lee influenced the scheme.

Hur and Park, loyal aides to Lee and chief executives at Samsung subsidiaries, each received a suspended sentence of three years in prison for illegally selling a controlling stake in Samsung Everland, the conglomerate's holding company, to Lee Jae Yong at a discount price in 1996. Each was also fined 3 billion won, or $3.2 million. In the transaction, Everland, an unlisted company, sold Lee Jae Yong 1.25 million shares at 7,700 won per share. Thanks to that deal, the son acquired 31.9 percent of Everland, which runs South Korea's largest amusement park. His current stake there stands at 25.1 percent, and he still controls the company.

Everland, which holds major stakes in such key Samsung subsidiaries as Samsung Life and Samsung Electronics, is the linchpin in a chain of cross-financing among affiliates that the Lee family uses to control the entire group. Thus the 1996 deal helped the son inherit control over Samsung, whose 59 subsidiaries and 250,000 employees generated 141 trillion won in sales last year, an equivalent of almost one-fifth of South Korea's gross domestic product. Samsung's overseas shipments last year, valued at the equivalent of $70 billion, accounted for 21 percent of all South Korean export.

"The accused knew that this deal would enable Lee Jae Yong to take over the control of Everland for just 9.6 billion won, an extremely small sum compared with the company's total value," the court said. "Clearly the accused have breached their official duty." A handful of family-controlled conglomerates, or chaebol, spearheaded South Korea's export-driven economy in the decades following the Korean War in the early 1950s. In recent years, accusations of foul play have dogged some of the top conglomerates as they underwent generational changes in their leadership.

As the groups expanded rapidly through stock-market listings and as the so-called "owner" families' direct holdings in the conglomerates dwindled to less than 5 percent on average, the men in control of management found it increasingly difficult to make a handover to sons and grandsons without resorting to illegal means, critics say.

In 2000, a group of 43 law professors who said they were acting in the public interest filed a lawsuit claiming that Hur and Park, who were Everland executives in 1996, sold the shares to Lee Jae Yong at an unfairly low price and without getting proper approval of the company's board of directors. After the professors' lawsuit, prosecutors investigated the case and indicted the two.

On 29 May 2007, the appellate court said the shares should have been sold to Lee Jae Yong for at least 14,825 won apiece. Everland lost at least 8.9 billion won in the transaction, it said. In the indictment in 2003, prosecutors estimated the loss at 97 billion won. The appellate ruling also said that a board meeting in October 1996 that approved the sale was invalid because it failed to have a quorum.

Economists campaigning for transparency at big businesses called on prosecutors to expand their investigations to the chairman, Lee. The son became an executive in Samsung Electronics, the world's largest maker of computer memory chips, in 2001. "It is certain now that Mr. Lee Jae Yong's illicit gaining of profit and inheritance of management control has lost social justification," said Kim Sang Jo, an economist at Hansung University and director of Solidarity for Economic Reform. "Even if he becomes the third-generation head of Samsung, he will not be treated as a trustworthy CEO by the Korean people."

Samsung denied the chairman's involvement. Huh and Park said in a statement that they would appeal the ruling to the Supreme Court. Lee Jae Yong was not indicted in the case. Even if the Supreme Court upholds the lower court verdicts, legal experts say, the son's stake in Everland will not be nullified because of the statute of limitations.

The court ruling, however, further dented the image of Samsung, which has been implicated in a series of corruption scandals. In 2005, audiotapes that were made public disclosed that Samsung executives had made illegal donations during the 1997 presidential election. Although he was not indicted, Lee apologized and Samsung donated 800 billion won to charity.

Chung Mong Koo, 68-year-old chairman of Hyundai, is on trial on charges of stashing away slush funds and encouraging questionable deals between subsidiaries aimed at helping his son, Chung Eui Sun, 37, raise his stakes in Hyundai. The Chungs apologized for the scandal and promised to donate $1.1 billion to charity. (SITE NOTE: See 2007 Hyundai Scandal.)

Chey Tae Won, the scion of the family that owns much of SK, South Korea's No. 3 conglomerate, was convicted in 2003 of wrongfully accruing personal wealth and damaging the group's affiliates through dubious stock trading and accounting irregularities he used to increase his stakes in the group. He received a suspended sentence and survived a revolt by foreign investors who tried to oust him. (SITE NOTE: This fight for management control caused Sovereign to give up in disgust and sell off their shares in the company.)