The scandal follows the recall of 1.9m exploding Galaxy Note smartphones in September and 2.8m faulty washing machines in October, both officially recalled by regulators after major safety concerns.
Now, according to media in South Korea, where Samsung is the biggest national employer, the company’s offices have been searched by prosecutors investigating a confidante of President Park Geun-hye. Samsung is suspected of secretly funding dressage training for the daughter of Choi Soon-sil, Park’s friend of 40 years. According to the Yonhap news agency, Samsung allegedly gave $3.1m to a company that Choi owned in Germany.
Park has faced public outcry and and an investigation into whether Choi manipulated government decisions, despite having no official government role. Tens of thousands of protesters demanded Park’s resignation in Seoul over the weekend.
Investigators are looking into whether Choi interfered in the nomination of senior officials, and used her relationship with Park to force companies to donate money to two not-for-profit foundations she set up and used for personal gain.
In an attempt to defuse the situation, Park has granted lawmakers the power to name her new prime minister, a move considered a major political concession. She told the speaker of the national assembly that she would ditch her own nominee and accept a deputy appointed by the opposition-controlled legislature and “let him control the cabinet”.
The raid on Samsung’s offices, following similar raids on eight banks last week, could spur a backlash against the company.
According to Korea Times, investigators will summon the executives from Samsung and other companies for questioning, to find out whether they made any deals to resolve any pending business issues with President Park in return for the donations.
Samsung did not respond to a request for comment.
It’s not the first time Samsung headquarters have been raided. They were searched in 2008 by prosecutors investigating allegations the company created slush funds to bribe officials.
“Samsung has become an embarrassment to Korea, where saving face is still a factor in reputation management,” said crisis management expert Jonathan Bernstein. “Samsung’s board of directors has to firmly take charge of the company’s direction now in order to reassure both internal and external stakeholders.”
The case be a test for South Korea’s chaebols – vast, family-owned conglomerates that have helped transform the country into an economic powerhouse. These corporate giants have a reputation for exerting an enormous influence over the government, as revealed by whistleblower and former Samsung manager Michael Kim.
“Samsung definitely controls the careers of prosecutors in Korea, destroying the careers of those that take any action against the company,” he told the Independent in 2013.
During campaigning in the presidential elections in 2012, candidates including Park vowed to curtail these powerful business dynasties. However, as polling day approached, Park pulled back on her plans to tackle the chaebols.
Samsung declined to comment due to the ongoing investigation.
This article was written by Olivia Solon in San Francisco, for theguardian.com on Tuesday 8th November 2016 21.09 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010