- The Washington Times - Sunday, April 23, 2006

SEOUL — Scandal-plagued businesses are countering public outrage with groveling apologies and by donating wads of cash to worthy causes — but not without sparking a backlash.

Two high-profile firms — Hyundai Motor Group and the U.S. investment firm Loan Star — announced big donations to charities last week amid growing scandals. Hyundai said it would give away $1 billion and Loan Star offered $100 million to as-yet-unnamed charities.

Both donations came with public apologies for corporate wrongdoing.

“These donations appear to be intended to influence a process [regulatory investigation] that should not be open to influence,” said Hank Morris, a director at Seoul consultancy IRC Ltd.

Hyundai faces prosecution over a political slush fund and charges that it improperly transferred wealth and power among top executives.

The Dallas-based Lone Star faces charges ranging from not paying local taxes to manipulating its books when it purchased Korea Exchange Bank in 2003 and sought to sell it to Kookmin Bank for an anticipated profit of $4 billion.

The deal is being probed by tax authorities, state prosecutors and the National Assembly’s audit committee.

Last week’s donations are not the first. In February, Samsung Group announced a donation of $800 million to charity after being mired in a political slush fund scandal last year.

Also last year, U.S. buyout fund Newbridge Capital, taking fire in the media for making $1 billion in tax-free profits on its sale of Korea First Bank to Standard Chartered PLC, gave charitable donations of $20 million.

Since the donations, regulators appear to have backed off, and media anger has cooled.

Samsung Chairman Lee Keun-hee was allowed to ignore a summons to appear before a National Assembly committee, while Newbridge has not faced the kind of regulatory and media criticism that continues to dog Lone Star and Hyundai.

Things may be different this time. So far, the high-profile gestures have failed to mollify either regulators or the public.

When Hyundai announced it would fund its donation by selling stock in affiliate Hyundai Glovis, the firm’s share price plummeted, infuriating minority shareholders. A top executive was summoned for questions by the prosecution on Thursday.

As for Lone Star, both the head of the Board of Audit and Inspection Jeon Yun-churl and Finance Minister Han Duck-soo have said investigations will be unaffected.

Mr. Jeon even suggested that the Korea Exchange Bank sale should be postponed until probes are complete.

The timing of the gestures is also stirring controversy.

“The Fair Trade Commission’s head has reacted with umbrage to both Hyundai’s and Lone Star’s offers,” Mr. Morris said. “Samsung made its offer when the investigation was nearly complete, but Hyundai and Lone Star seem to be making theirs in the middle of the process.”

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