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S. Korea crackdown on big business
SEOUL, March 4 (Reuters) -- South Korea has said it will investigate the business practices of Samsung and five other big groups, extending a crackdown on the country's family-run conglomerates. "We judge cross-shareholding and dubious intra-group transactions are still going on despite repeated calls for correction," Chang Hang-seok, a director of the investigation team at the Fair Trade Commission, told a news conference on Tuesday. The financial watchdog would investigate Samsung Group, LG Group, SK Group, Hyundai Motor Group, Hyundai Group, and Hyundai Heavy Industries over the next three months, he said. New South Korean President Roh Moo-hyun has said that without reform the sprawling companies, called chaebol, could sow the seeds of a financial crisis. Business practices such as mutual debt guarantees within conglomerates were blamed for fanning the last one, in 1997 and 1998. The latest investigation comes after the head of top oil refiner SK Corp was arrested on charges of illegal stock deals last month. Chang said that in the third quarter the regulators would also investigate state-run companies over insider trading. Analysts have warned a big crackdown on business groups could aggravate a fragile business climate that is already clouded by geopolitical risks and soaring oil prices. "The financial markets do not like to see an upheaval," said Oh Suk-tae, an economist at Citibank. "Whether a new corporate governance through chaebol reform can result in improved business efficiency is also a matter of heated debate." The stock market fell more than two percent on Tuesday, pressured by news of the investigation and concerns over the nuclear crisis in North Korea and a possible war in Iraq. No witch-hunt
Echoing comments by President Roh, regulators said they were not conducting a witch-hunt, but businesses fretted. "I don't want to say the investigation is designed to tame the conglomerates," said a spokesman for the Samsung Group. "But it is true many in the business community are watching it with concern." The companies all said they would willingly cooperate. The commission's Chang said potential sanctions against any corporate wrongdoing would be in line with earlier cases. Another commission official said it had levied a combined 210 billion won ($178 million) in fines on five conglomerates since 1998 over illegal intra-group transactions. South Korean conglomerates dominate the economy, Asia's fourth-largest. Financial ripples from the multi-billion-dollar failure in the late 1990s of Daewoo Group, formerly the country's second-largest conglomerate, still linger, and the whereabouts of ex-Daewoo chairman Kim Woo-choong are still unknown. Roh has vowed to take a tough stance against the chaebol and has been under scrutiny over how he deals with big business. He won the presidential election last December. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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