Page last updated at 10:16 GMT, Thursday, 17 April 2008 11:16 UK

Prosecutors charge Samsung chief

Samsung Group chairman Lee Kun-hee
Mr Lee is one of South Korea's most powerful business executives

The chairman of South Korean firm Samsung, Lee Kun-hee, has been indicted for tax evasion and breach of trust, prosecutors say.

The announcement follows a three-month investigation into alleged corruption at South Korea's biggest conglomerate.

But the probe cleared the firm of allegations by a former executive that it used a multi-million dollar slush fund to bribe prosecutors and judges.

Both Samsung and Mr Lee have denied any wrongdoing.

Son of the founder of Samsung, Mr Lee took over as head of the business in 1987 since when it has grown to become the world's largest producer of memory chips.

'Structural problems'

Prosecutors said they would not formally arrest the 66-year old, one of South Korea's richest men, and that he would remain free pending his trial.

They defended the decision not to detain him saying such a course of action would "cause enormous disruption" to Samsung's business and have "negative repercussions" for South Korea at a challenging time for the economy.

Taking this investigation as a new starting point, Samsung is preparing reform plans based on various sectors of our society
Samsung statement

But in a strongly-worded statement, prosecutors said Samsung had a lot of "structural problems", including "illicit transfer of management control".

This related to allegations that Mr Lee and other executives sought to use illegal accounting techniques to covertly transfer control of the business to his son.

"It is the hope of our investigation team that this probe would serve as an opportunity for Samsung to shed these problems and be reborn as an undisputed ultra first-class global company," it said.

Legal deference?

Although denying wrongdoing, Mr Lee said during his interrogation that he assumed responsibility for the problems at the firm and might even consider stepping down.

The corruption case has been keenly followed in South Korea where Samsung remains one of the country's most powerful and respected organisations despite growing concerns about the alleged behaviour of its leaders.

The BBC's John Sudworth in Seoul said South Korean courts had, in the past, been reluctant to punish businessmen for fear of doing damage to the economy.

Lee Kun-hee pursued by reporters after being interviewed by prosecutors
The allegations have attracted huge media interest

If found guilty, Mr Lee might expect the court to show him leniency, he added.

Samsung is best-known for its electronics unit, but it is also one of the world's largest shipbuilders.

With a global workforce of 254,000, it enjoyed annual profits of more than $12.9bn (6.45bn) in 2006 and accounts for nearly a fifth of all South Korean exports.

Samsung apologised for the damage that the affair had done to its reputation and promised it would "reform" its practices in the future.

"Taking this investigation as a new starting point, Samsung is preparing reform plans based on advice from various sectors of our society," it said after the charges were announced.


SEE ALSO
Prosecutors question Samsung boss
04 Apr 08 |  Business
Samsung HQ raided in bribes probe
15 Jan 08 |  Business
Fresh corruption probe at Samsung
23 Nov 07 |  Business
Samsung boss admits price fixing
20 Apr 07 |  Business
Country profile: South Korea
28 Feb 08 |  Country profiles
Timeline: South Korea
12 Feb 08 |  Country profiles

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