The case neatly encapsulates the confused tale of South Korean politics and business as the country recovers from the Asian financial crash. In the process, it is sometimes hard to disentangle important reforms to the nation’s business practices from an effort to muffle criticism of the government and settle old political scores–of which South Korea has many. Until now, President Kim Dae Jung has mainly targeted the chaebol, the huge conglomerates that borrowed and expanded blindly in the boom years. But lately Kim has gone after bad practices at smaller companies too, attempting to revamp a corporate culture in which the misuse of funds and tax evasion have all been widely accepted. Opposition parties, the chaebol and some of their workers, however, have alleged that the reforms can also be a convenient way for Kim to play political hardball.
That’s one reason it’s hard to tell what’s behind the assault on Hong and his companies. The newspaper has been a leading critic of Kim’s government. JoongAng’s employees are suspicious. Hong, a brother-in-law of Samsung chairman Lee Kun Hee (who is also under investigation for possible tax evasion), is part of the economic establishment, and JoongAng’s coverage has sniped at Kim’s cabinet members as well as his style of government. JoongAng’s reporters union says it detects “the snaky smell of mean retaliation and the taming of an independent press by means of [political] power.” The paper denied most of the charges against Hong, who says his businesses have only followed normal “customs.” Adds Lee Pil Sang, a professor of finance at Korea University: “There is a view that this tax probe is a purging of the government’s critics.”
The tax authorities insist Hong’s case is not political; they say he didn’t report $57 million in income–and that he bought and sold real estate under his executives’ names to avoid paying taxes. Hong promised in a statement that he would take responsibility if there have been “any violations of laws.” “We now face a truly difficult situation,” he told his employees at the anniversary ceremony. Outside the auditorium, there were fewer than half the number of congratulatory plants the paper usually gets on its birthday. The main opposition party sent one. So did Samsung and other chaebol. But this year there were no good wishes from the ruling party.
