By Mike Sidwell

Samsung’s former chief attorney Kim Yong-chul has publicly accused Samsung of “improper accounting methods to create more than Won 7 trillion [US $7.5 billion] in slush funds” and “regularly bribing prosecutors, judges, high-ranking government officials, journalists and scholars to deflect criticism over the group’s illicit stock deals to transfer ownership of the group from the chairman to his son”, writes the South Korean news agency Yonhap. According to the International Herald Tribune (IHT) Mr Kim also alleges that a “family member of Samsung Group Chairman Lee Kun-hee used 60 billion Won [US $65 million] of the money to buy expensive art work.” The IHT also reports Samsung as saying “that he [Kim] was turning against Samsung out of “personal grudges””.

The Associated Pressquotes Chu Woo-Sik, Head of Investor Relations at Samsung Electronics, as dismissing the matter as, “nothing to worry about”. In a statement reported in the Financial Times (FT) the group asserts that, “There can’t be irregular accounting because Samsung group’s affiliates have conducted accounting in accordance with global standards.” However, Mr Kim (Samsung’s former chief attorney) claims that Samil PricewaterhouseCoopers, responsible for auditing the group, were bribed by Samsung to “cover up the book-keeping shenanigans” ( Yonhap); an allegation the accountancy firm refutes as being “completely groundless” ( FT).

The scandal has widened as others have stepped out to add support to Mr Kim’s allegations. The FT details how another whistleblower, Kang Bu-chan, who was a general manager at Samsung SDI’s United States unit, claims “that he had managed a Won 300bn [US $326m] slush fund between 1992 and 1999.” While a former legal adviser to South Korean President Roh Moo-hyun, Lee Yong-chul, has released photographs he says supports his claims that Samsung tried to bribe him ( FT).

On 23 November, the country’s national assembly passed legislation for an independent counsel to head the investigation into the corruption allegations, arguing that “state prosecutors could not be trusted because they were also accused of taking bribes from Samsung” ( The New York Times). The special counsel is not expected to be operational until mid-December. According to Bloomberg, following Mr Roh’s announcement “seventeen traded units of Samsung Group lost Won 4.85 trillion [US $5.21 billion] in combined market value.”

On 30 November, South Korean prosecutors “raided Samsung Securities Co. [a financial arm of the Samsung Group] as part of their probe into allegations Samsung Group amassed slush funds to bribe government officials” ( Bloomberg).

Na Seong Lin, an economist at Hanyang University in Seoul, notes that “Samsung is the spine of the economy. If it shakes, the economy shakes” ( IHT), underlining just how important the case is for those that view it as “a litmus test of whether South Korea's relatively youthful democracy and judicial system are ready to crack down on the white-collar crimes of family-owned conglomerates, called chaebol in Korean” ( Yonhap).

By Nadja Kostka

The International Herald Tribune (IHT) notes that it looked like an “attempt to muzzle the bearer of bad tidings” as Loskutovs was “due to report on campaign financing violations by the prime minister’s coalition” during the 2006 parliamentary election campaign”.

The sacking eventually led to a politically unstable situation, leading three ministers to quit their posts and Prime Minister Kalvitis to resign on 5 December, according to Associated Press. Yielding to the public pressure, Kalvitis reversed his decision, so Loskutovs remains in his seat, but the government decided to reprimand him instead for faulty bookkeeping. Replacements for the ministers were appointed on 8 November.

In a statement made to the IHT, Loskutovs suggests that Latvia’s creation of an anti-corruption authority in 2002, “was not to fight corruption – it was to get into the EU and the NATO”.

The public protests following news of his dismissal focussed not only on corruption in the “oligarchy” - a power structure dominated by wealthy men – Loskutovs says, but also on the general standard of living in Latvia. Latvia’s annual inflation had reached 13.2 percent, a 10-year high for the Baltic state and the highest in the European Union, the Associated Pressreports.

For more information, see TI Latvia’s press release on this issue at: www.transparency.org/news_room/latest_news/press_releases_nc/2007/2007_07_16_latvia_a_c_chief

By Mike Sidwell

The Philippine’s national road improvement and management programme, which is partly financed by the World Bank, is described by the bank’s vice president Jim Adams as “the country’s main tool for modernizing infrastructure” ( The Associated Press). “The World Bank said 382 km (237 miles) of roads had been built or upgraded across the Philippines in the first phase of the project and 975 km of existing road had been resurfaced and maintained across the archipelago,” writes Reuters. While according to AFP, “The second phase of the project would have involved improvements on 450 kilometres (279 miles) of national arterial roads and bridges.”

World Bank spokesman Peter Stephens explained that the postponement on making a decision for the second phase is because, “board members wanted to read a report into the first stage of the project by the World Bank’s internal investigation unit, whose findings were published on the same day phase two went for approval to the board” ( Reuters). On 19 November Mr Stephens told The Associated Pressthat “he expects the board to discuss the projects again in the next few weeks because it wants “to be sure that all safeguards and precautions are in place.” Mr Stephens is quoted in Reuters highlighting the work the World Bank has already done with the government and civil society organisations to “put in place a number of pretty tough anti-corruption measures.” The Wall Street Journal though writes that the bank’s governing board blocked the loan, “because it felt bank staff hadn’t fully handled corruption issues in reviewing the loan – and hadn’t briefed Mr. Zoellick [the World Bank’s new president] on the proposal.”

According to The Wall Street Journal a bank official revealed that, “From 2003 to 2006 the World Bank rejected three successive rounds of bidding involving China State Construction because of “strong signs of collusion and excessive pricing.” The three rounds of bidding were for two World Bank financed projects, the contracts for which were worth US $33 million ( Voice of America).

Ricardo Saludo, President Gloria Macapagal Arroyo’s cabinet secretary, said “the government was committed to curbing corruption and was working with the World Bank to address the issues of transparency in all projects” ( The Associated Press). Although finance secretary Margarito Teves said that the Philippines “could also look elsewhere for loans,” according to AFP.

Meanwhile, the Financial Times reports that “the Department of Public Works and Highways says it will not be able to start many of the projects on time if the World Bank fails to approve the loan this year”.

Another issue apparently facing the World Bank is “whether to begin debarment proceedings against China State Construction and other firms accused of bid rigging, and recommend to their home countries that criminal charges be brought against them” ( The Wall Street Journal).