Political Scandal and National Economy

Predicting the long term impact of 2016 Korean political scandal

Jae Meoung Choi

Chadwick International

This research paper is based on the topic What is the 2016 Korean Scandal of Ms. Choi Soon Sil and
President Park, and how it is related to the current status of economy in Korea? To answer this question,
I will first define scandal, and explain its historical context. Then, I will discuss the relationship of scandal
of one country and the economy that results from it.

To strengthen the claim, I will provide evidence, picked by strict restrictions, which could support my
claims. Lastly, by observing and analyzing scandals of the past and their effects, I will apply the results I
have obtained in my process of predicting the economical effects of Choi Soon Sil gate - the 2016 Korean
Political Scandal. Ultimately, by the analysis, I would be able to predict the result of this particular
scandal.

Context

I. Introduction
II. Cases
1. Watergate Scandal
2. Lockheed Scandal
3. 2016 Korean Political Scandal
III. Analysis
IV. Conclusion

Introduction

1974 May 9th, a Legislation-Judiciary Committee was held to determine whether Nixon should be
impeached are not. The results told that Nixon should be impeached due to two reasons - first, he have
complicated and baffled the investigation process on the scandal, and secondly that he have abused his
political powers and neglected his constitutional duty to execute the laws fairly. Under these
circumstances, Nixon attempted to avoid the ignominy by willingly resigning from his seat. 1974 August
9th, President Nixon resigned.

Publics reaction to Watergate Scandal was negative throughout the case, and even after. To Nixon, this
incident called the end of his political career. Compared to the approval rating of 67% at the beginning of
his second term, it have decreased to 24% at lowest.

1977 January 27th, the court began their trial on Tanaka Kakuei and his fellow councilors. 1983 October
12th, Court ordered Tanaka Kakuei to serve four years in prison and amerced total of 500 million Yen.

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Tanaka appealed to this order, and claimed that he will not excuse himself from the congress. The
opposition parties reaction was to bring forward Tanaka excuse resolution, and not participate the
congressional agenda.

Even though it seemed like Tanaka have met his journeys end, he was able to maintain his seat, and was
able to be re-elected on the 37th lower house election - based on the strong support from his hometown,
Niigata prefecture. But due to the degradation of Liberal Democrats public image, they failed to secure
the majority of seats in senate. Furthermore, Nakasone who experienced extreme criticism against his
relations with Tanaka Kakuei, announced From now on, Influence of Tanaka on Politics will be
foreclosed.

The impeachment process of President Park first began 2016 December 9th, as the congress passed the
motion for impeachment. On March 10, 2017, the Constitutional Court upheld the impeachment in a
unanimous 80 decision, terminating Park's presidency, and making it the first time that a sitting president
was removed from the office since the Sixth Republic of South Korea was set up after the country's
democratization.

The scandals mentioned above are few of the biggest scandals for the last 50 years. The common factor
among these scandals are that the individual with the highest authority have failed their duty and have
been impeached, or have failed to maintain their position as the de facto. But despite what they have in
common, they have shown different aspects of how that particular incident have influenced one nations
economy. For instance, After watergate scandals, Approval rate for Nixon constantly decreased with the
employment rate and strength of the dollar. Western worlds have been already under the 1970s recession.
According to Economic report of the president 1975, it can be known that after Nixon have resigned
unemployment rate have increased.

Date Unemployment Rate

Jan 1, 1973 4.90%

Jan 1, 1974 5.10%

Jan 1, 1975 8.10%

Jan 1, 1976 7.90%

But on the other hand, it is quite sure that Lockheed Scandals had critical influence upon various nations
and companies. Lockheed scandals have buried one of the most largest arsenal companies near the border
of bankruptcy, not to mention how it have disturbed many nations that have been related to the incident.
Until now, Lockheed suffers from their infamous history of lobbying and scandals. This does not only
include Japan mentioned in this paper, but ranges from japan to western europe.

Then why did these scandals each result in different aspects of economy? Why did Nixons action of
bugging other candidates not only decreased the publics approval rate of Nixon, but also have aggravated
the economy? Again, why did lockheeds action to lobby to governors of nations in order to increase their
sales ultimately destroyed the original inner circle of japan and created a new power struggle, and
decreased the profits earned from foreign business? And how did Korea result in severe struggle of
generation gap, with economic growth constantly decreasing and finally discussed by the OECD that
whether korea should be disqualified. This research paper debates on these questions as its main topic. In
other words, this papers main research topic is to compare,contrast, and analyze how scandal impacts on
one nations economy. But in specific, by doing so to the previous two examples, i would like to
investigate and anticipate how the 2016 Korean political scandal would influence Korea in nearby future.

To fulfill this purpose, this research will focus on how the three scandals were conducted, and what kind
of reaction occurred. It is predicted that whether the purpose of the scandal was economical or
psychologic benefit of the conductor, whether a company was related to the scandal for business reasons
will change the results and impact of the scandal by how the factors were combined to the scandal. By this
research, how scandals affect economy would be defined in much clear sense.

Cases
1. Watergate Scandal
Source (http://www.washingtonpost.com/wp-srv/politics/special/watergate/timeline.html)

(http://watergate.info/)

Summary

Richard Milhous Nixon was one of the most fascinating political figures of the 20th Century. His long
political career began in 1947 as he was elected to the House of Representatives.

5 years later, he was chosen for Eisenhowers running mate - and successfully started eight years of his
Vice - president life. Walking away from his office, he ran as a presidential candidate on 1960.
Unfortunately, he was defeated by JFK by 0.17% of the votes. ( "Dave Leip's Atlas of U.S. Presidential
Elections". uselectionatlas.org. Retrieved October 21, 2012.) Number of reasons could be suggested as the
losing factor, but the most significant reasons were: Economic recession 1957-58, Gain of catholic voters
by kennedy, and ultimately the outmatching campaigning skills of Kennedy. Furthermore, the fact that
Nixon did not consider on the swing states but actually campaigned in all to states can be seen as the most
important reason he actually lost. (The Making Of The President documentary/ David L. Wolper's
documentary film "THE MAKING OF THE PRESIDENT 1960", narrated by Martin Gabel, gives viewers
a close-up look at the inner workings of the 1960 campaign for President of the United States, a
hard-fought struggle which was won (just barely) by Massachusetts Senator John F. Kennedy. The film

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made its debut on ABC-TV on December 29, 1963, just a month after JFK's death. ) Recovering from his
defeat, Nixon prepared for future elections. Between his loss in 1960 and victory in 1968, it is known that
Nixon began his years of preparation which includes five years of political reorganization. Between that
time, he had lost one more election - the California gubernatorial election. But years of his preparations
could not confirm his victory among the Republican party. What actually made him the candidate of the
republicans were the state primaries. Challenged by Governor George Romney of Michigan, Governor
Nelson Rockefeller of New York, Governor Ronald Reagan of California, and Senator Charles Percy of
Illinois, Nixon won nine of the thirteen state primaries held that season, although Governor Reagan won
the popular vote with only california, supported by the large population. These victories, along with
pledged delegate support from states not holding primaries, secured Nixon the nomination on the first
ballot, where he named Governor Spiro Agnew of Maryland as his running mate.

He positioned himself as the champion of silent majority, and emphasized law and order. Nixon
became the nations 37th President on 1969. He ran ahead of his opponent, incumbent Vice president
Hubert Humphrey, who have lost over hundred of electoral votes. His popularity showed constant
increase, and was re-elected for his second term in January 1973. He was a good president, a man who
brought peace to the world, but he was a crook. World now remembers him as not only the first man who
was able to become president as a former vice president who are not incumbent, but the crook who
conducted his unforgivable actions against the people of the nation - by Lying to them.

The beginning was when Watergate Burglars broke into the Democratic Partys National Committee
offices on June 17, 1972. Following this one of the most historic moment, Frank Wills, the security guard
of Watergate hotel, alerted the hotel that there was a burglary on the hotel, which was to be called an
action that ultimately became the action that exposed the Watergate scandal to the public. The
Washington post reported a GOP security aide is among the Watergate burglars, suggesting there could be
some connection between this incident and the president candidate, Nixon. Former attorney general John
mitchell, head of the Nixon reelection campaign, denied their link to the operation - strongly suggesting
rumors shall stay rumors.

Ten days later, a A $25,000 cashiers check, apparently earmarked for the Nixon campaign, wound up
in the bank account of a Watergate burglar, The Washington Post reports. A week later, Washington post
discovered that a $25,000 cashiers check - earmarked for the Nixon campaign - was wound up in the
bank account of one of the Watergate burglars. Inevitably showing that Nixon was somehow related to

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this case. Following this discovery, it turned out that John Mitchell controlled a secret Republican fund
used to finance widespread intelligence-gathering operations against the Democrats. FBI establishing that
the Watergate break in was a part of massive campaign of political spying on behalf of the Nixons
reelection, the interest upon the case continued to increase.

This money trail was to lead the investigation into another level, finally showing a link to the finance
committee of CREEP. Being a shortened word for the Committee for the Re-Election of the President,
CREEP was a fundraising organization of Nixon. They were usually used for money laundering and slush
funds, and was of course directly and actively involved in the Watergate scandal. If the burglary can be
said as the starting of the watergate scandal, the existence and the actions of CREEP could be said to be
the spark which started the fire, for it was the decision of the CREEP to spend total of $500,000 to pay the
legal expenses for the five watergate burglars, which ultimately turned the case from single burglary to a
political scandal.

Being investigated continuously John Dean, the lawyer of the Watergate, came by to protect these
scumbags and Howard Hunters, the practitioner of the CREEP, Phone number was found on one of the
burglars note, the press began to show their interest. Furthermore, it was found out by the police
investigations that these burglars have already invaded democrats office three weeks ago. Moreover, this
burglarly was no simple case of robbery. It was an action to change the broken Eavesdropping, and it
became obvious that this was not a simple robbery. The FBI began to lay their hands.

Being alarmed of the urgent situation, Nixon attempted to cover the incident with no limits on the
method. CIA being the only institution for Nixon to control, he ordered CIA to cover up the case using
their budget. A bribery plan for the witnesses were planned, which eventually failed - as interests of the
public was concentrated upon this case, even the CIA could not flexibly use their money. Despite Nixons
effort, situation worsened every second for him.

But despite these dishonorable incidents, Nixon was reelected in 1972 - taking more than 60 percent of
the vote and crushing his archenemy, the candidate of democrats, Senator George McGovern. The story
of watergate was forgotten from the public and the media - as this outstanding victory became the top
story. Nixon took 520 votes of the electorate among total of 528 electorates, only letting votes of
Washington D.C and Massachusetts to the democrat.

Losing the election, George Mcgovern sought his political death, as he continued to experience defeat.
Later it was proved that he was a better professional of hunger, not a politician. McGovern later served as

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U.S. Ambassador to the United Nations Agencies for Food and Agriculture from 1998 to 2001 and was
appointed the first UN Global Ambassador on World Hunger by the World Food Programme in 2001.

Coming back to the story, winning with absolute victory, it seemed watergate was to become an
outdated urban legend. With decreasing public interest, Nixon saw his chance of recovering. He began to
break off connections between any affiliated person. January 30, 1973, Former Nixon aides G. Gordon
Liddy and James W. McCord Jr. were convicted of conspiracy, burglary and wiretapping in the Watergate
incident. These actions acted as a catalyst, actually making the investigation more active and broader.
Nixon, irritated, began to fast-forward his course of actions. In April 30, Nixons top White House
staffers, H.R. Haldeman and John Ehrlichman, and Attorney General Richard Kleindienst resign over the
scandal, and White House counsel John Dean was fired.

Unfortunately for Nixon, the Senate Watergate Committees began its nationally televised hearings from
May 18. Alexander Butterfield, the former presidential appointments secretary - Deputy Assistant to the
President, divulged that Nixon have set several detectophone on his presidential office, and it has the
record of Nixons speaking that could easily prove that he is related to the watergate break-in. The
committee ordered the white house to submit the recording tape as an evidence, but Nixon refused to,
claiming it is for the national security,

Following the committee, Nixon ordered Elliot Richardson, the attorney general, to dismiss the special
prosecutor, but he refused the order and resigned. With the power of the attorney general passed to the
Deputy Attorney General, William ruckelshaus, Nixon once again ordered the dismissal of the prosecutor.
Just like Richardson, William refused the order and resigned from his position. Finally, Robert Bork, the
Solicitor General, finally dismissed the prosecutor. This was the cases of incident that was to be later
called the saturday night massacre. The effect of this incident was crucial to Nixons presidency. Nixon
was finally able to abolish the office of the special prosecutor, but he failed to stay as the truthful,
respected president to the people. Disappointed by his abusing of presidential powers, americans turned
their back against their own president. And from this moment pressure for impeachment mounted in the
congress.

Stressed by the situation, Nixon decided to argue his innocence in the Watergate case. From his speech
made in November 17, Nixon declared: Im not a crook, infamously denying any relation of himself in
the Watergate scandal. Unfortunately, it became widely known that he was. With bravery, nixon stood up
and grandly passed the record tapes to the committee. It was not long before the committee found out that
the subpoenaed tapes were cut by Nixons taste. Nixon argued the act of state doctrine, suggesting that

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the courts should not sit in judgment of another government's acts done within its own territory. Of
course, this argument wasnt accepted, and Nixon was forced to give in the original tapes.

The original tapes handed in confirmed the fact that nixon ordered the CIA to baffle the FBIs
investigations. Furthermore, the tapes included the conversations between Nixon and his aides, discussing
how they should respond to the situation.

This revealed the fact that Nixon have told a lie - that he was not involved in the scandals - and
ultimately turned out to be crook. Ultimately the whole United states went through a stage of chaos, and
the conservative men of america, abandoned Nixon. Nixon, realizing he is sure to be impeached and
convicted, resigned from his seat in august 9th, right before the committee decided to impeach him.

Timeline of Watergate

1968
November 1968: Richard Milhous Nixon, the 55-year-old former vice president who lost the
presidency for the Republicans in 1960, reclaims it by defeating Hubert Humphrey in one of
the closest elections in U.S. history.
1970
July 23, 1970: Nixon approves a plan for greatly expanding domestic intelligence-gathering
by the FBI, CIA and other agencies. He has second thoughts a few days later and rescinds
his approval.
1971
June 13, 1971: The New York Times begins publishing the Pentagon Papers the Defense
Departments secret history of the Vietnam War. The Washington Post will begin publishing
the papers later in the week.
September 9, 1971: The White House plumbers unit named for their orders to plug leaks
in the administration burglarizes a psychiatrists office to find files on Daniel Ellsberg, the
former defense analyst who leaked the Pentagon Papers.
1972
June 17, 1972: Five men, one of whom says he used to work for the CIA, are arrested at
2:30 a.m. trying to bug the offices of the Democratic National Committee at the Watergate

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hotel and office complex.
June 19, 1972: A GOP security aide is among the Watergate burglars, The Washington Post
reports. Former attorney general John Mitchell, head of the Nixon reelection campaign,
denies any link to the operation.
August 1, 1972: A $25,000 cashiers check, apparently earmarked for the Nixon campaign,
wound up in the bank account of a Watergate burglar, The Washington Post reports.

September 29, 1972: John Mitchell, while serving as attorney general, controlled a secret
Republican fund used to finance widespread intelligence-gathering operations against the
Democrats, The Post reports.

October 10, 1972: FBI agents establish that the Watergate break-in stems from a massive
campaign of political spying and sabotage conducted on behalf of the Nixon reelection
effort, The Post reports.
November 11, 1972: Nixon is reelected in one of the largest landslides in American political
history, taking more than 60 percent of the vote and crushing the Democratic nominee, Sen.
George McGovern of South Dakota.
1973
January 30, 1973: Former Nixon aides G. Gordon Liddy and James W. McCord Jr. are
convicted of conspiracy, burglary and wiretapping in the Watergate incident. Five other men
plead guilty, but mysteries remain.
April 30, 1973: Nixons top White House staffers, H.R. Haldeman and John Ehrlichman,
and Attorney General Richard Kleindienst resign over the scandal. White House counsel
John Dean is fired.
May 18, 1973: The Senate Watergate committee begins its nationally televised hearings.
Attorney General-designate Elliot Richardson taps former solicitor general Archibald Cox as
the Justice Departments special prosecutor for Watergate.
June 3, 1973: John Dean has told Watergate investigators that he discussed the Watergate
cover-up with President Nixon at least 35 times, The Post reports.
June 13, 1973: Watergate prosecutors find a memo addressed to John Ehrlichman describing
in detail the plans to burglarize the office of Pentagon Papers defendant Daniel Ellsbergs
psychiatrist, The Post reports.
July 13, 1973: Alexander Butterfield, former presidential appointments secretary, reveals in

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congressional testimony that since 1971 Nixon had recorded all conversations and telephone
calls in his offices.
July 18, 1973: Nixon reportedly orders the White House taping system disconnected.
July 23, 1973: Nixon refuses to turn over the presidential tape recordings to the Senate
Watergate committee or the special prosecutor.
October 20, 1973: Saturday Night Massacre: Nixon fires Archibald Cox and abolishes the
office of the special prosecutor. Attorney General Richardson and Deputy Attorney General
William D. Ruckelshaus resign. Pressure for impeachment mounts in Congress.
November 17, 1973: Nixon declares, Im not a crook, maintaining his innocence in the
Watergate case.
December 7, 1973: The White House cant explain an 18 1/2 -minute gap in one of the
subpoenaed tapes. Chief of staff Alexander Haig says one theory is that some sinister
force erased the segment

1974
April 30, 1974: The White House releases more than 1,200 pages of edited transcripts of the
Nixon tapes to the House Judiciary Committee, but the committee insists that the tapes
themselves must be turned over.
July 24, 1974: The Supreme Court rules unanimously that Nixon must turn over the tape
recordings of 64 White House conversations, rejecting the presidents claims of executive
privilege.
July 27, 1974: House Judiciary Committee passes the first of three articles of impeachment,
charging obstruction of justice.
August 8, 1974: Richard Nixon becomes the first U.S. president to resign. Vice President
Gerald R. Ford assumes the countrys highest office. He will later pardon Nixon of all
charges related to the Watergate case.

Aftermath

Watergate had profound consequences in the United States. There was a long list of convictions and
other casualties. For example, the aftermath of Watergate ushered in changes in campaign finance reform
and a more aggressive attitude by the media. By the time the 25th anniversary of Watergate occurred in

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1997, a vast library of books and films existed. Watergates influence was felt in the Clinton
Impeachment of 1998-99.
Nixon died in 1994 and was eulogised by the political establishment, although he was still a figure of
controversy.
The investigations into Watergate that led to the resignation of Richard Nixon are a case study in the
operation of the American Constitution and political values.

Short-term effects of Watergate

1. Resignation of President Richard Nixon

Confirming his impeachment, Nixon resigned before he could be impeached and convicted on August
9th, 1974.

2. The Watergate scandal resulted in 69 government officials being charged and 48 being found guilty.
These included John N. Mitchell- Attorney General of the United States, convicted of perjury, Jeb Stuart
Magruder- Head of CREEP, pled guilty to conspiracy, H.R. Haldeman- Chief of Staff for Nixon,
convicted of perjury, Frederick C. Larue- Advisor to John N. Mitchell, convicted of Obstruction of Justice

3. Gerald Ford becomes President of the United States

Ford, appointed Vice President by Nixon after former Vice President Spiro Agnew resigned due to
criminal charges, After Nixon resigned, Ford became the only President who was neither elected
President nor Vice President.

4. Trust in Executive branch lessenedAccording to a Gallup Poll, trust in the Executive branch of
government sank from 73% in May of 1972 to 40% in April of 1974 at the height of the Watergate
scandal. However, that trust rebounded to 62% under Bill Clinton.
"This long-term eleven point drop, however, is not a likely legacy of Watergate. It is more likely related
to Bill Clinton's job approval rating of 57% -- relatively high for Clinton, but lower than the 62%
recorded for Nixon in May, 1972" (Gallup Poll).

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5. Loss of seats for Republicans in the House and Senate in the 1974 Elections
In the 1974 House and Senate Elections, the Democrats gained forty-nine seats and five seats,
respectively. This change was not a long-term change, as in the 1978 House and Senate Elections,
Republicans won fifteen seats and three seats respectively. After the 2004 Elections, Republicans had
control of the House and Senate, with a 53.3% and 55% majority, respectively. Compared to the 1974
Elections when the Democrats had a 66.8% and 61.2% majority, respectively. Watergate did have a small
short-term effect on the House and the Senate, but in four years it had no more effect.

Long-term effects of Watergate

1.Trust in Politicians lessened

According to a Gallup Poll in 1972, which was before Watergate became one of the biggest scandals of
the 20th Century, more than half of American adults said they could trust the government "all or most of
the time. According to NPR in 2010, only 22% of American adults say they trust the government "almost
always or most of the time," demonstrating the significant impact that the Watergate scandal has had on
public confidence in the U.S. government.

2. Passing of the Ethics in Government Act

The Ethics in Government Act is a U.S. federal law that was passed in the wake of the Watergate scandal.
The act created public disclosure of financial and employment history of public officials. It also created
restrictions on lobbying efforts by public officials for a set period of time after leaving public office.
Lastly, it created the U.S. Office of Independent Counsel, which was terminated in 1999 and replaced
with the U.S. Department of Justice Office of Special Counsel. Both of these offices were created to
investigate alleged misconduct in the executive branch.

3. Amendment of the Freedom of Information Act

After the Watergate scandal, Congress wanted to amend the FOIA (Freedom of Information Act) to create
a more open government. President Ford vetoed the act, but then Congress voted to override his veto. The
amendments to the act give one (1) the right to see records about [one]self, subject to the Privacy Act's
exemptions, (2) the right to amend that record if it is inaccurate, irrelevant, untimely, or incomplete, and
(3) the right to sue the government for violations of the statute including permitting others to see [ones]
records unless specifically permitted by the Act.

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4. Rise in Investigative Reporting

In 1975, Investigative Reporters and Editors was formed, a non-profit organization that focuses on the
quality of investigative reporting. Investigative reporting became the "cool" thing to do after Woodward
and Bernstein, and it is now commonplace in newsrooms to have an investigative team, whereas
originally it was thought in the Post newsroom that Woodward and Bernstein were wasting their time.

5. Passing of the National Emergencies Act

The National Emergencies Act is a U.S. federal law that was passed in 1976 to stop open-ended states of
emergency and formalize the power of Congress to put checks and balances on the emergency power of
the President. After Watergate, Congress investigated the scope of the President's legal powers, and found
that the U.S. had been in a constant state of National Emergency since 1950. A state of National
Emergency can revoke the right of habeas corpus, which is the right to a trial. The act set a limit of two
years on states of national emergency.

6. Increase in Interest in Journalism

Enrollment at the MU School of Journalism increased significantly after Woodward and Bernstein's
reporting, said said Daryl Moen, an MU journalism professor who was executive editor of the Columbia
Missourian from 1974 to 1984. It certainly attracted hundreds, if not thousands, Moen said of the
growth of all journalism schools in the post-Watergate era. Along with the MU School of Journalism,
other Journalism school's enrollment increased. This interest has decreased in recent years, but overall
there has been an increase in enrollment in Journalism schools and journalism in general.

Overall Effects

Short term Long term

Resignation of Nixon Trust in politicians lessened

Government Officials being charged Passing of the ethics in government act
General Ford becomes the president Amendment of the freedom of
Trust in executive branch lessened information act
Loss of seats for republicans Rise in investigative Reporting

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Passing of the national emergencies act

Increase in interest in Journalism

2. Lockheed Scandal
Summary

On 6 February 1976, the vice chairman of the Lockheed Corporation told a United States Senate
subcommittee that Tanaka had accepted $1.8 million in bribes through the trading company Marubeni
during his term as prime minister, in return for having All Nippon Airways purchase 21 Lockheed L-1011
aircraft in 1972. Tanaka Kakuei reacted, but in a somewhat different way from what the people wanted.
On April 2, Tanaka publicly declared his innocence. But it was too late this time, and investigations on
the case continued. Arresting various related figures followed. Finally on June 27th, Tanaka Kakuei was
finally arrested initially on charges of violating Japanese foreign exchange restrictions by not reporting
the payment.

To understand how things got to this, it is obligatory to understand the primary condition of Japan
politics in the 60s and the 70s. Tanaka Kakuei was a man that started from nothing. Born in 1918, his
family was a farmer family. Unfortunately due to his fathers business failure he had to grow up in a
extremely lacking condition. He grew up to be a businessman, constantly widening his area. He finally
made his mind, to stand as a politician. He earned various adepts from his home, Niigata-ken, which
would be his political base for the next 40 years. Through a process of overriding Sato Eisaku clique,
soon Tanaka Kakuei clique became the majority among the congress. This made Tanakas attempt to
become prime minister easier.

Tanaka suggested the Lockheed that he would make the ANA to choose Tristar if Lockheed paid the
appropriate price. Tanakas incentive met ts consequences. Tristar was selected as ANAs airliner for
next generation. During that time ANA have already ordered three of DC-10 from Mcdonnell Douglas,
which was cancelled by the ANA unilaterally. Furthermore this order was to make the situation seem
more bizarre than it could.

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The order did not bring up any rumors even until the day Tanaka left his seat of prime minister. 1974
December, being criticized as a plutocrat Tanaka kakuei left his seat. Many intellectuals of japan,
represented by Ishihara Shintaro, led this movement of Anti-Tanaka. 1974, Ishihara criticized the
plutocratic actions of Tanaka- opening the start of the Anti Tanaka Movement. Surprisingly, Tanaka
Kakuei left the seat without resistance.

As Tanaka left his seat, it seemed like he buried his greed on governing others. But his intention was
different on this case. As Lockheed Scandal started to rise, he worried as he left the seat his opponents
such as Fukuda Takeo or Miki Takeo to become the next prime minister, kicking him out of the congress.
In the end, Miki Takeo was elected as the next prime minister.

Initially, Miki Takeo and Tanakas Relationship wasnt the worst. It was due to their difference between
aptness. Miki Takeo used the concept of Clean Miki, claiming he would get rid of bribery and the dirty
side of politics. On the other hand, Tanaka was a man of bribery. As he didnt have any relationships with
high-class from the beginning as other Elite-Politicians, his method of increasing his political status was
limited upon bribery and giving privilege to others. Due to this extreme difference, it was natural for the
relationship between the two to be exterminated.

As Miki became the Prime minister, started to pressure Tanaka as he promised to investigate the
Lockheed Case. In the end, as previously mentioned, Tanaka was arrested. But as Tanaka planned
revenge towards Miki, Tanaka united with most of the cliques in LDP to aggrieve Miki. Soon Tanakas
action earned its results, and Mikis Clique became Minority among the LDP. Following this discord,
LDP lost the election by losing most of the seats. Miki took the responsibility for the loss in election and
left his seat. Tanaka, on the other hand, succeeded in re-election with 168,522 votes. Tanaka, becoming
the leader of major cliques, attempted to make Ohira as the next prime minister, but as Fukuda Takeo
promised Ohira to hand him the seat of Prime minister after two years, Hukuda and Ohira united.

Fukuda didnt keep his promise, and the unity was broken. Using this timing, Tanaka contacted Ohira
and made him one of his men. He ordered Takeshita Noboru to get the list of party man, visiting the
members one by one to coax them to become one of his men. Due to this effort, Ohira was able to gain
victory over Fukuda in the primary election. In the end, Fukuda gave up to stand on the election, and
Ohira won the election by vote of no confidence.

Fukuda declared war upon Ohira, as he knew well enough that he was able to be prime minister by help
of Tanaka. Soon, this became the war of Tanakas men and Fukudas men. Ohira dismissed the original
government, and started a dangerous gamble. He started a stimultaneous election of Representatives and

17


senators. On the first few days, it seemed for the LDP to be losing, and it was predicted that there would
be a transfer of power. But as Ohria died during the Election, LDP stopped their discord and concentrated
on the election as a one party. Eventually LDP won 284 seats of the congress, with Tanaka Kakuei being
elected again by overwhelming advocacy from Nikiita.

After, Japan Politics were virtually handled by Tanaka Kakuei. He was able to change the prime minister
as he wished, and there were rumors that you had to be well presented to Tanaka to become a politician.
He was called the Yami Shogun, as he was controlling the politics behind the stage. Realistically
Tanaka was the man to contact for Lockheed, as his abilities could solve their problem.

Thus, Tanaka was bribed to influence peddling on ANA to choose Lockheeds product.

The Lockheed bribery scandals encompassed a series of bribes and contributions made by officials of
U.S. aerospace company Lockheed from the late 1950s to the 1970s in the process of negotiating the sale
of aircraft.

The scandal caused considerable political controversy in West Germany, Italy, the Netherlands and
Japan. In the U.S. the scandal nearly led to the downfall of the corporation, which was already struggling
due to the commercial failure of the L-1011 TriStar airliner.

Tristar airliner was one of the most successful products of Lockheed. Lockheed was the best on military
aircraft, but was one step lower than other companies on the area of civil aircraft. Thus to recover the
economic loss, the tristar was made. It was an ambitious product, as all of the skills and techniques
Lockheed have achieved while building military aircrafts have been all combined on this single product.
It was a state-of-the-art product.

Unfortunately, the market was already overwhelming with rivalry companies products such as Boeing
747 and Mcdonnell Douglas DC-10. Furthermore, Tristar was going to be runned by the new engine
Rolls-Royce was working on, which was a work in progress. Unfortunately Rolls-royce called
bankruptcy, and through the chaotic process of nationalization, it seemed that Tristar turned out to be a
waste of money.

Lockheed was on the edge of bankruptcy, and Tristar was their only hope. Thus, they lobbied to
politicians and government of various countries. This included Italy, Netherland, Japan, Saudi arabia, and
West Germany. Japan was one of the most important target of lobbying, but as JAL already decided to
order DC-10 Lockheed targeted the ANA.

18


During that time ANA was planning to order airliners due to the increased needs of traveling due to the
economical growth of japan and to prepare the 1972 winter olympics in Sapporo. Thus ANA began their
process of choosing airliners, and they had three options. But as previously mentioned, the most important
part of the airliner- the engine - was not yet built, thus the Tristar was excluded from ANAs choice. In
the end, Boeing 747 was also excluded due to its size, and DC-10 finally became the winner- and ANA
ordered three of DC-10.

But as some mysterious individual sent out a document to the stockholders meeting suggesting the team
that have chosen DC-10 was related to a fraud incident, which made the stockholders to change the order
team. The changed team was lead by Hashimoto Tomisaburo. Hashimoto suggested Japan should buy
airliners after 1974, and this argument was accepted by the MLIT and MLIT restricted the introducing of
airliners on the business. But as ANA have already officially ordered DC-10, Mcdonnell Douglass
Factory have began producing Dc-10s.

Then, without any sign, Wakasa tokuji - the president of the ANA- suggested to order Tristar instead of
DC-10. And with re-evaluation of the choices, it was chosen to order Tristar. October 30th, it was
officially announced.

January 1974, Tristar was officially sold to the ANA and started to be used from Febuary. At that time, it
was a bizarre action ordering the tristar, but it wasnt seen as a scandal.

In Feburary 4th, 1976, it was publicly revealed that Lockheed had paid $22 million in bribes to foreign
officials in the process of negotiating the sale of aircraft including the F-104 Starfighter, the so-called
"Deal of the Century". In case of japan, through the vice-chairman of Lockheed it was known that
Lockheed had paid approximately $3 million in bribes to the office of Japanese Prime Minister Kakuei
Tanaka for aid in the matter.

The politics of Japan faced chaos. Osano Genji, Wakasa Tokuji, Wowoba tetsuo, Hayam Hiroshi and
many more were called to the council to heard and Kodama Yoshio wha was on hospital was heard in the
hospital as a witness to the case.

The prime minister of that time miki takeo was a man with nickname of clean miki. Many Japanese
citizens called for deep investigation on the case. In the end Miki Takeo ordered investigation on the
public prosecutors office. Moreover, as the case was related to Rockheed he even asked help to the U.S
president Gerald Ford.

Tanaka Kakuei began to use his relationships with congressmen among Liberal democratic party. So
called Tanaka-sided congressmen started to plan way to bring Miki takeo from his seat, by suggesting

19


current investigation is a target investigation, previously set to politically kill Tanaka Kakuei. As Miki
takeos party was the minority among the congress, it was an adverse situation for him.

Shiina Hatsusaburo, typical figure of anti-miki member of LDP, criticized Miki Takeo, Arguing He is
hurrying to end this case by investigating Tanaka, for he has something to hide from the public. He
teamed up with Tanaka and met an agreement with each other to impeach Miki takeo from the prime
minister seat. Most of the cliques of congress (Ohira, Hukuda, Mizuta, Hunada) agreed upon the
agreement. Only the Nakasone was on Mikis side.

Japanese citizens outraged to the action that seemed to be intented on covering up the Lockheed Scandal,
but Danaka refused to stop and proceeded on consolidating the relationships with the various cliques.
During this process, Tanaka Kakuei was arrested by Yoshinaga Yosuke. Tanaka Kakuei saw this as an
action of Anaba Osamu, the attorney general on the Nakasone clique, and began to plan his revenge.

Unfortunately, Miki Takeo met his terms end. He lost the election on Decemeber 5th 1976, and returned
the seat of prime minister. Following, Hukuda Takeo, the leader of Anti-Miki Movement became the
prime minister. Furthermore on this election Tanaka ran for the senate, and won by 168522 votes- which
is the record for the most votes on japan.

Tanaka was arrested on July 27, 1976 and was released in August on a 200 million ($690,000) bond.
He was found guilty by a Tokyo court on October 12, 1983 for violations of foreign exchange control
laws but not on bribery. He was sentenced to four years in prison, but remained free on appeal until his
death in 1993.

The scandal involved the Marubeni Corporation and several high-ranking members of Japanese political,
business and underworld circles, including Finance Minister Eisaku Sato and the JASDF Chief of Staff
Minoru Genda. In 1957, the Japanese Air Self-Defense Force wished to buy the Grumman F11F-1F Super
Tiger to replace the F-86 Sabre then in service, but heavy lobbying by Lockheed of the key LDP figures
led to the adoption of the F-104 instead.

Later, Lockheed hired right-wing nationalist underworld figure Yoshio Kodama as a consultant in order
to influence Japanese parastatal airlines, including All Nippon Airways (ANA), to buy the Lockheed
L-1011 TriStar instead of the McDonnell Douglas DC-10. On February 6, 1976, the vice-chairman of
Lockheed told the Senate subcommittee that Lockheed had paid approximately $3 million in bribes to the
office of Japanese Prime Minister Kakuei Tanaka for aid in the matter.

Lockheed paid 2.4 billion to earn the contract from ANA. 500 million of the total was received by the
Prime Minister. 160 million was received by ANA's officials. 1.7 billion was received by Kodama.On

20


October 30, 1972, ANA announced its decision to purchase 21 Lockheed L-1011 Tristars, which cost
approximately $5 million each, even though it had previously announced options to purchase the DC-10.

In March 1976, in a protest at the scandal, actor Mitsuyasu Maeno made a suicide attack on Kodama's
Tokyo home by crashing a light aircraft onto it.

Tanaka was arrested on July 27, 1976 and was released in August on a 200 million ($690,000) bond.
He was found guilty by a Tokyo court on October 12, 1983 for violations of foreign exchange control
laws but not on bribery. He was sentenced to four years in prison, but remained free on appeal until his
death in 1993.

Economic effect of Lockheed Scandal

The creation of foreign corrupt practices act

Certainly the greatest impact of the watergate scandal. Congress enacted the Foreign Corrupt Practices
Act in response to widespread questionable corporate payments. The law, which makes offering payments
to foreign officials to obtain or influence business illegal, also contains significant internal accounting
control objectives and recordkeeping requirements. GAO solicited information from 250 corporations
regarding the Act's impact on corporate activities.

The Act has brought about efforts to strengthen corporate codes of conduct and systems of internal
accounting controls. However, many corporations believe that the cost of complying with the Act exceeds
the benefits derived. More than 30 percent of the corporations engaged in foreign business reported that
they had lost overseas business as a result of the Act. There is also extensive dissatisfaction with the
clarity of the Act's accounting provisions. Increasing the uncertainty over what constitutes compliance
with the Act is the controversy over whether the provisions include a materiality standard. The Act's
antibribery provisions have also been criticized as being ambiguous. In addition, many corporations
believe that they are suffering a competitive disadvantage due to the lack of an international anti-bribery
agreement.
Bungeishunj became one of the best selling magazines.

Commonly seen on Political scandals, rise of journalism is one of the most seen effects of these kind of
incident. Takashi Tachibana, who wrote the Tanaka Kakuei Kenkyu (A Study of Kakuei Tanaka),
supported the sales of Bungeishunj.

21


Lockheed goes near bankruptcy, Decrease of company image leading to Mergers and Acquisition
in 1995

Not to mention that Lockheeds original intention on the bribery was to sell Tristar and escape the
danger of bankruptcy, due to this scandals being exposed to the public their public image was destroyed,
and their economic status even got worse. Lockheed have experienced rough sledding with C-5 galaxy
and L-1011, but as Tristar have lost by DC-10 among their rat like competition, they were once again hit
by severe economic loss. Furthermore, following this infamous incident their plans for construction of
warships and AH-56, the Cheyenne attack helicopter, were cancelled. Of course not to mention that the
whole scandal led to considerable political controversy in West Germany, the Netherlands, Italy, and
Japan. In the US, the scandal led to passage of the Foreign Corrupt Practices Act, and nearly led to the
ailing corporation's downfall.

Nowadays, by the continuous scandals, Lockheed and its members are known as the most corrupt
military related company. Even recently, Lockheed Martin (the new form of lockheed) paid $ 4.7million
to settle charges/ They paid a lobbyist with illegally-used taxpayer funds. It paid the lobbyist, a revolving
door former U.S. Representative, to help it get it a giant, no-bid, $2.4 billion-a-year contract to run giant
national labs for many years to come. Charles Tiefer, the Professor at the University of Baltimore School
of Law, says Lockheed is not merely the biggest defense contractor in the world, it has a chokehold on
the nations defense funding. He continues The top illegal lobbyist was former Rep. Heather Wilson of
New Mexico. For a number of years, as Representative, she presumably was very friendly with
Lockheed/Sandia of her area. It seems possible from press accounts that on day one when she left office,
they rewarded her by starting a $10,000/month lobbying deal. Ultimately in 95, Lockheed was bought by
Martin, and started as Lockheed martin.

The fall of Miki Takeo, replaced by Fukuda Takeo - the change of economic policy

Fukuda Takeo was a man who held idea of anti-Keyns. Compared to Tanaka kakuei, who caused
economic chaos through suggesting excessive high-growth policy, Fukuda Takeo suggested balanced
budget and stable economic strategy. He predicted that the global economy would turn to protective trade
policy, and argued Japans economy - based on exportation - would be at risk. He suggested Japan to
concentrate on home market to prepare for the future.

His prediction was wrong, as the trade barrier was liberalized through the extermination of communism
and WTO. But still, one must be considered that the Japan already had a large economy, therefore

22


depending only on current account surplus for the economy to run had limitations. For instance, China
today are suffering from the disparity of wealth among citizens. Since the 2008 economic crisis, china
experienced limitations on the foreign market, and by changing their concentration from foreign market to
home market they are trying to maintain the economic growth rate. This is stimulating the disparity of
wealth among china, increasing the number of poor.

But this action of concentrating on home market was a mistake, and caused the Galapagos syndrome to
occur in japan. Even before Fukuda concentrated on home market, Japanese market was already different
from other markets. Japan used Hanji and Hirakana, and this made them to use exclusive type of
computer, such as PC98. Moreover, we have to consider the fact that Japanese economy was on its top-
the bubble economy - on the 70s and the 80s. Thus Fukuda didnt see the needs to apply international
standard on home market, furthermore foreign market didnt even had the technology as japan yet, which
allowed Japan to use their own standard. But as time passed, international standard was established as
America led the electronic technology market. Adversely, Japan was depacinated by these american
standard using countries. They began to develop their own kind of technology, becoming more and more
isolated from the global society.

Ultimately, Japan had fallen into their own trap - being one of the most influenced, or one of the most
damaged country by the Galapagos Syndrome. Even in the 21st century, Japan remains to be the only
country that uses Shift-JIS.

After the incident, Japan went through a chaotic process. Their own way of politics were analyzed, and
people began to start looking at politicians in a suspicious way, which wasnt often used to describe
people of Japan. With Tanaka Kakueis presumptuous actions, LDP(Liberal Democratic Party) lost the
election and lost most of the seats, which made them to unite with other party to build a coalition
government, opening a new range of political actions for Japan. Various parodies of the case were made-
which can be represented by the game Im sorry. ANA continued providing their service, even though
they experienced some economic loss. Considering that Japan was experiencing their Prime time, the
bubble, it was a right choice for them

Within Lockheed, board chairman Daniel Haughton and vice chairman and president Carl Kotchian
resigned their posts on February 13, 1976. Tanaka was eventually tried and found guilty of violating
foreign exchange control laws, but was not charged with bribery, a more serious criminal offense.
Crucially for Lockheed, the fallout from the scandal included the loss of a contract worth in excess of $1

23


billion. Despite all the economic loss, the origin of all this incident -Tristar, was well used. Actually,
Tristar remain as the airliner without any incidents during its use on the ANA until 1995. Imagine how
proud Lockheed wouldve been.

3. Korean political scandal 2016

Summary
This particular incident was shown to the public around september to october 2016, as news company
JTBC have claimed to have obtained a tablet PC which has evidence that Choi - Soon sil have been
related to the creation of Mir/K-sports foundation. The reason this became a problem was that two months
before the news, some claimed that 53 conglomerates of korea was forced to give in total of 774000000
won. It was Tv chosun who claimed so - arguing that Mir foundation was able to collect more than
500000000 won from conglomerates, and this process included Jong bum Ahn, the chief secretary of the
presidential office exercising his political powers against them. Furthermore, there was additional
suspicion against one individual choi soon sil of intervention in state affairs and unfair admission of Yoo
ra Jung, her daughter, to Ewha womans university based on privilege.

The factor which created this case much more interesting was the fact that choi soon sil have never been
an outsider to President Park. Choi Soon-sil has known President Park since the 1970s when Choi's father,
Choi Tae-min, was then-president Park Chung-hee's mentor as the family was still grieving for the
assassination of then first-lady Yuk Young-soo.

After the death of the first-lady Yuk Young-soo in 1974, Choi Tae-Min then became president Park
Chung-hees mentor as the whole park family was still grieving for the assassination. He first personally
contacted the first lady - gun hae Park, the future President Park, suggesting that he is able to channel
communication with her mother. Persuaded by his argument, Park called him into the blue house.
Meeting Park face to face, Choi argued that Parks mother didnt just die from the assassination - but she
have moved aside from her way, clearing the path towards president parks age. He began to constantly
recommend president park beginning external activities, preparing her to enter the world of politics.

But around Choi there were various types of illegal actions, ranging from Sex Scandals to economic
seizure. It is even said that as president park went on a volunteer work, congressmen and ranking

24


government officials would show up. Choi Tae mins power increased as day went by.

Thus, it seemed intriguing enough for journalists to investigate more on this case. It would have been
odd to say that Gun hae park, who had such a close relationship with Choi soon sil, did not know any of
her actions of interrogating the conglomerates to obtain economical profit, and even interrupt her political
actions.

This was a case that could actually lead to a trace of president parks scandal. And in the end, it turned
out to be true.

On October 24th, President Park attempted a change to the publics mood by claiming that she would
amend the constitution. Unfortunately for president park, that night JTBC reported that they have
obtained the Tablet PC of Choi soon sil, and have confirmed that Choi have intervened with president
parks politics - ghostwriting her speeches and policies to ones tastes.
President park admitted that Choi have been adjusting her speeches one day after, presenting her first
public apology. Right after her apology, JTBC argued that choi did not only adjust the speech, but have
been assigning orders that are heavily related to the national importance, such as the placing of public
servicer and policies of diplomatic matters, even matters of unification between north and south. Public
became furious upon the fact, and the first candlelight protest related to this matter occurred - with, some
politicians gradually raising their voices that president park should be impeached. Without realizing the
importance of the matter, Park suggested a change of secretaries and staffs, including the appointment of
Byung Jun Kim as the new prime minister. This guerilla cabinet reshuffle was followed by the political
development worsened as opposition parties proposing the impeachment of president, reception of the
special counsel bill, and lastly the withdrawing of administration of byung jun kim.

Park gave a second public apology, claiming she would accept any investigation upon this case and will
also allow the reception of the special counsel bill. But on the other hand, this apology was filled with her
personal justifications, which did not include any indication of dropping her political powers. Especially,
her statement - When I think about not being able to even soothe the people, the thought this is not why
I became president' comes to mind. became a public issue, increasing the opposition parties power.

Timeline of Korean Scandal

25


November 17, 2016, both opposition and domestic party passed the Law of Office of the Independent
Counsel.

On December 5, 2016, three opposition parties agreed to introduce a joint impeachment motion against
President Park Geun-hye. The motion, which was signed by 171 of 300 lawmakers, was put to a vote on
Friday, 9 December 2016, and passed with 234 out of 300 votes, a tally much greater than the required
2/3 majority and which included many of Park's own ruling party.

On December 19, Choi Soon-sil attended the first hearing in the trial of President Park in Seoul District
Court. In the first hearing, prosecutors say Choi used their relationship to pressure companies to donate to
two foundations, and siphoned off money for personal use. However, she denies the allegations that she
influenced the president.

On January 5, 2017, constitutional court began its first trial regarding President Park's impeachment.[68]
On January 16, 2017, Choi Soon-sil testified herself in the Constitutional Court and denied any
wrongdoings. The Constitutional Court declared that it will hold the final pleading from President Park on
Feb. 24, suggesting that the court will make a decision on the impeachment trial before March 13.

On March 10, the court issued a unanimous ruling, confirming the impeachment proposal and removing
President Park from office.

October 17 Student protests at the prestigious Ewha Womans University in Seoul spark a wider
investigation into corruption and influence-peddling in President Park Geun-hyes inner circle.

October 24 South Korean broadcaster JTBC breaks open the scandal by uncovering a tablet computer
belonging to Choi Soon-sil, a friend of Ms Park who held no official position in the government.
Documents found on the computer suggest Ms Choi has received confidential presidential documents and
edited key speeches.

October 25 Ms Park admits her close ties to Ms Choi, nicknamed the shaman adviser, and apologises
for causing the nation grief.

26


October 29/30 Hundreds of thousands of people gather in Seoul for the first of six mass rallies over the
scandal. Ms Park accepts the resignations of key aides embroiled in the affair.

November 1 Ms Choi returns from Germany and is questioned and detained by prosecutors.

November 8 Investigators raid the headquarters of Samsung Electronics for the first time. The company is
believed to have come under pressure to make donations to Ms Choi.

November 20 An increasingly embattled Ms Park is accused by prosecutors of being a criminal

conspirator in Ms Chois alleged scheme.

November 24 SK and Lotte join a growing list of South Korean companies raided by investigators over
the scandal.

November 29 Ms Park offers to resign but fails to provide a timetable for departure. Her proposal is
dismissed by the opposition as a stalling tactic.

December 6 In an unprecedented televised hearing, the heads of the countrys biggest companies are
interrogated by lawmakers in the National Assembly.

December 9 Lawmakers vote decisively to impeach Ms Park. Power is transferred immediately to prime
minister Hwang Kyo-ahn.

March 6 Special prosecutors recommend indicting Ms Park but are unable to do so because of presidential
immunity

March 10 Constitutional Court upholds impeachment motion. Snap election to be held within 60 days.
(https://www.ft.com/content/9e5b361e-bde8-11e6-8b45-b8b81dd5d080)

Economic effects
1. Rise of unemployment rate and Decreasing economic growth (GDP)

27


As the leader of the nation - President Park, have been impeached, Global market have identified Korea as
a nation with political anxiety and Risk from G2s pressure. Thus, investments have been constantly
decreased. Following, employment rate and economic growth rate of korea are gradually decreasing.
According to the OECD, United states have outpaced the growth rate of korea last quarter of 2016, once
again gaining higher economic growth compared to korea. Last time this kind of phenomenon has
occurred was the third and fourth quarter of 2014. The reason this matters is that the only time korea have
had lower yearly economic growth rate compared to the united states was 1998 - when Currency Crisis
have struck korea. Due to this counter turn of economic growth rate between two nations, the Federal
Reserve increased its benchmark interest rate a quarter point amid rising confidence that the economy is
poised for more robust growth.
2. Degradation of Korea as a business partner

Considering the fact korea has an economy that is dedicated to export of commodities such as cars, IT
products, and refined petroleum, monopolization of the global market is impossible - thus extreme
competition awaits korea. Furthermore, due to the investment costs and lack of natural resource,
fluctuation of products based on international trends and localized shocks are infeasible. As korea is
dependent upon these products as their only benefiting business, they have become dependent upon
foreign investments.

This paradigm of the national economy is not suitable for the future, and is turning out to be true. As
Donald Trump have been elected as the president of the united states and in the same time Korea have lost
their political leader, the uncertainty of korean economy have increased. Due to these political
disturbance, Foreign investment upon national companies have decreased, and due to the lowering GDP
citizens have decreased their consuming. Furthermore, Trumponomix is based on protectionism - which
decreases export-oriented industries profit, decreasing investments and consuming in the same time.

3. Increase of uncertainty of economy

Following Trump being elected as the president of the United states,

4. Acephalousa Samsung,

Lee's arrest will caused an immediate void in the Samsung Group's leadership, a dreadful scenario that the
company has been bracing for a while. As he was on the process to inherit his fathers role as the leader of

28


the company, this incident of arrest calls for a restructuring of leadership - although, Samsung have not
prepared any Plan Bs.

Until March of 2017, there are no sign of individual that acts as a control tower for Samsung rising.
Actually, due to this void of leadership Stockholders meeting (held 2017 march 24th) was unable to
decide any decisive matter. Once again, Samsung have shown that without a control tower Subsidiary
companies are determined to cling for its existence until the return of leadership, or await for the rise of a
new leader. Announcing they have decided to pause the process of conversion to a holding company, it
seems that Lees arrest will not only call a void of leadership - but also, cease management of Samsung as
long as he is arrested. Below is citation from IBTimes, which shows how experts have predicted this
incidents impact would be.

As for the Korean economy, experts opine that Lee's arrest will put a small, but clear dent in Korean
economy. The Korea Employers Federation (KEF) has said it is shocked to learn about Lee's arrest and is
gravely concerned for the local economy. "Samsung Electronics is a leading South Korean company that
accounts for 11.7% of overall sales and 30% of operating profit in the manufacturing sector. The apparent
absence of leadership at Samsung will likely expand uncertainties here, which in turn may lead to a drop
in the country's creditworthiness and thus work as a major burden on the local economy," said the
federation. The Korea International Trade Association (KITA) went a step ahead and said Lee's arrest
should have been weighed in and that the warrant for his arrest was thoughtless.

"There are concerns about whether there had been any consideration for the negative impact it will have
on the local economy when deciding to arrest the top executive officer of the leading global firm," said
the trade body.
(http://www.ibtimes.co.uk/samsung-heir-lee-jae-yong-arrested-impact-company-korean-economy-160704
4)

5. Possibility of being a currency manipulator.

(https://www.bloomberg.com/news/articles/2017-01-05/south-korea-may-be-named-currency-manipulato
r-think-tanks-warn)

United states Ministry of Finance selects countries as a currency manipulator when a government or

29


central bank buys or sells foreign currency in exchange for their own domestic currency, generally with
the intention of influencing the exchange rate. As Donald Trump prepares to be sworn as the U.S.
president, state-run think tanks in South Korea are raising the possibility of being labeled as a currency
manipulator along with China. Korea was listed in the U.S. Treasury Departments currency watch list in
October, along with China, Japan, Germany, Taiwan, and Switzerland, for meeting two of the three
criteria used to monitor currency practices. Theres concern in Seoul that the U.S. may adjust the criteria
so Trump can make good on his pledge to brand China a currency manipulator within 100 days of taking
office, and that changes could also apply to South Korea.

The problem of becoming a currency manipulator is that currency is immediately passed through a
revaluation, decreasing the competitiveness of exporting of the nation. Compared to 1988, the impact of
being a currency manipulator would be lowered, due to the fact that interest rate have increased and
Dollars are strong. Thus, there are limitations to the decrease of Won/Dollar exchange rate.

30


Analysis
Common effects

Short Term Long Term

Watergate Resignation of President Trust in politicians

Nixon lessened
Various government New laws constructed
officials charged guilty Ethics in
Rise of Gerald Ford government act
Trust on government Freedom of
lessened information act
Loss of seats for National
republicans emergencies act
Rise in investigative
reporting and journalism

Lockheed Creation of foreign Lockheed is merged

corrupt practices act
Lockheed goes near
bankrupt
Miki takeo falls and
Fukuda replaces the seat
of prime minister
with martin, decrease of
sales.
Tokyo prosecution gains
popularity and trust
Parodies of this incident
among subculture is
created
Liberal democrats make
a coalition with Liberal
Club party.

2016 Korean Scandal Impeachment of

President Park
Arrest of Jae Yong Lee
Increase of uncertainty
in Business

31


Increase of possibility
of being selected as
currency manipulator

Upon this point, i have summarized the context of each scandals, and analyzed their effects upon nation
with evidence. From this point, i would like to compare and contrast the effects of each scandals, and
predict the long term effect to come in future of korea.

Hypothesis suggestion
Until now, political economy research have not been concentrating on the relationship between how
scandals that are connected to the nations control tower influence the economy. On other words, research
until now have neglected the fact that image of politician and decreased public trust could impact the
production rate and export trade surplus. But historically it can proved that scandal has influence upon the
nations economy.

But in specific, how scandal affects economy can be differed by its background and the groups related to
the incident. Scandal can be broadly divided into two types: i) Scandals that are done for economic
benefit, and ii) Scandals that are done to earn political benefit. Type i) is a scandal which relates to a
conflict conducted in order for one individual or a company to gain economic profit. For instance, when
president of one nation conducts illegal activity in order to gain or achieve economic benefit - such as the
Lockheed Scandals, can be assumed as i). On the other hand, Type ii) are scandals which are done in
order to relieve one individual psychologically. Watergate scandals, which was related to conflicts -
bugging other candidates - done in order to confirm Nixons victory, could be deemed as a Type ii)
scandal. Comparing these two, how can we predict the impact of a scandal that show aspect of both types?

First off, lets concentrate on Watergate Scandals. The beginning of the Scandal was 1972 june 17th,
when Nixon was not far from his second term election. Five anonymous individuals were arrested due to
their illegal break-in to the watergate hotel. This incident did not bring any shock to the public when it
was first known, but as the whistleblower called the deep throat have supported the washington post to
denounce the connection of Nixon and this break-in, situation continued to worsen for Nixon. The
congress held special committees to investigate the case, and suspicion upon Nixon gradually increased.

32


Furthermore, rather than cooperating with the investigators, Nixon tried to complicate the levels of
investigation. The senate ultimately entered the process of planning impeachment of Nixon - and Nixon
willingly resigned from his seat to avoid the dishonor of becoming first president to be impeached. This
scandal could be distributed as type ii) scandals, as the original conflict was conducted in order for Nixon
to gain victory over other candidates on the upcoming election. Furthermore, he didnt earn any economic
profit - in fact, he actually had to invest his campaign fund to cover up this case.

The impact on the economy this scandal was not intimately shown, but slowly began to rise as time
passed. The most significant impact that could be seen was the change of economic policy. Due to
Nixons resignation, Gerald Ford inherited the seat of president. His job was to clear up the mess up the
former president, Nixon. Watergate have decreased trust in politicians, and have resulted in loss of seats
for republicans. Under these circumstances, Fords administration failed to remedy the nation's economic
problems, although by 1976 the economy had begun to recover from the previous year's recession.

Above are the graphs of U.S total Fertility rate and U.S unemployment rate. As economy gradually
recovered, fertility rate increased after the first quarter of 1970s, but on the other hand the unemployment
rate have also increased. The origin of this reciprocal incline were the economic errors done by Ford. Ford
replaced his first economic program, which raised taxes and capped spending in an effort to combat
inflation, with a plan that cut taxes and limited government spending in the hopes of fighting
unemployment - which have failed.

It must be duly noted that even though economy was recovering, it have been struck with two crucial

33


factors - the first oil shock and waste of government funds on vietnam war. America was suffering from
Inflation and Stagflation, and ultimately Ford had to increase the taxes to pay up New yorks dept.
Moreover, Ford faced extreme counterforce on the senate - which can proved by the fact that While Nixon
only vetoed 42 budgets during his presidential term of approximately six years, Ford vetoed 66 budgets
during his presidential term of two and a half years.

Thus, it could be said that Scandals that originates from need of political benefit results in void of
leadership and passing of new laws. Which, both results in aggravation of the economy. The void of
leadership first brings a torrential change of economic policy, which calls a reaction from the public -
usually negative.

Secondly, Lockheed Scandal was a type i) scandal related to several nations ranging from western europe
to eastern asia. Lockheed, being anxious of their sales for Tristar L-1011, conducted Lobbying against
various politicians, including Tanaka Kakuei of Japan. On February 6, 1976, the vice-chairman of
Lockheed told the Senate subcommittee that Lockheed had paid approximately $3 million in bribes to
Kakuei Tanaka for aid in the matter. Lockheed then paid 2.4 billion to earn the contract from ANA., and
on October 30, 1972, ANA announced its decision to purchase 21 Lockheed L-1011 Tristars, which cost
approximately $5 million each, even though it had previously announced options to purchase the DC-10.
Tanaka was arrested on July 27, 1976 and was released in August on a 200 million ($690,000) bond. He
was found guilty by a Tokyo court on October 12, 1983 for violations of foreign exchange control laws
but not on bribery.

Lockheed Scandal was definitely a type i) Scandal, as even though court have sentenced Tanaka guilty
due to his violations of foreign exchange, it is also a fact that he have received massive amount of dollars
in exchange for opening a path for increasing the sales of new product lines. After Lockheed Scandals
was presented to the public, government faced extreme criticism from the public. Although the prime
minister, Miki Takeo, played a major role in placing Tanaka in corner, he was criticized by the Liberal
Democrats on the senate as he have placed Tanka through a law enforcement. The Liberal Democrats
conducted several Miki Takeo Resignation movement, ultimately pulling him down from his seat.

Lockheed company went near bankruptcy after the case, as they not only have failed to increase their
sales but also have denigrated themselves through the scandals. Lockheed chairman of the board Daniel
Haughton and vice chairman and president Carl Kotchian resigned from their posts on February 13, 1976.

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The scandal also played a part in the formulation of the Foreign Corrupt Practices Act which President
Jimmy Carter signed into law on December 19, 1977, which made it illegal for American persons and
entities to bribe foreign government officials.

From this Scandal, it can be implicated that Type i) Scandal results in downfall of the company related to
the conflict, and creation of limitation or restriction applied to nations politicians. But there are some
aspect of impact both types of Scandal share, which is the enhancement of press and journalism.
Following, economic benefits are given to certain press or paper - usually those who have provided
critical information in disclosing the case. In this case, the beneficiary can be determined as Bungeishunj
- which have played a critical role in disgorging Tanaka and his connections. They were benefited of
becoming one of the top-selling weekly magazines after the scandals. Limitations and restrictions applied
after the case could be represented by the creation of foreign corrupt practices act.

Congress enacted the Foreign Corrupt Practices Act in response to widespread questionable corporate
payments. The law, which makes offering payments to foreign officials to obtain or influence business
illegal, also containing significant internal accounting control objectives and recordkeeping requirements.
On the other hand, the law was ambiguous on various aspects - and was sought to be questionable.

The Act has brought about efforts to strengthen corporate codes of conduct and systems of internal
accounting controls. However, many corporations believe that the cost of complying with the Act exceeds
the benefits derived. More than 30 percent of the corporations engaged in foreign business reported that
they had lost overseas business as a result of the Act. There is also extensive dissatisfaction with the
clarity of the Act's accounting provisions. Increasing the uncertainty over what constitutes compliance
with the Act is the controversy over whether the provisions include a materiality standard. The Act's
antibribery provisions have also been criticized as being ambiguous. In addition, many corporations
believe that they are suffering a competitive disadvantage due to the lack of an international anti-bribery
agreement. (Impact of Foreign Corrupt Practices Act on U.S. Business, 1981, GAO)

According to U.S Government Accountability Office, More than 30 percent of the corporations engaged
in foreign business reported that they had lost overseas business as a result of the Act. Thus it can be said
that by a scandal that relates to ones financial benefits, countries connected to the incident experience a
rapid decrease in effect of their currency. For instance, after the Lockheed Scandals, the effect of Dollar
on U.S. Foreign Direct investments have rapidly decreased.

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As previously mentioned, Lockheed went nearly bankrupt after the case. But in these types of scandals,
the fall of the debatable company is followed by restrictions upon his actions, and passing of
anti-corruption laws.

Conclusion
In conclusion, on scandals which specifically relate to conductors economical benefit is followed by: 1.
Void of leadership/Replacement of leader, 2. Creation of restrictions / limitations, 3. Downfall of effect of
nations currency. 4. Rise of Journalism, and scandals which are related to conductors political benefit are
followed by: 1. Void of leadership/Replacement of leader, 2. Economic aggravation (Stagflation /
Inflation), 3. Rise of Journalism. From these observations, it can be implicated that Scandals which have
gained aspect of both types, the impact will be similar to those that have suggested as the impact of each
types. Based on the conversation above, hypothesis as such can be suggested about how Korean political
scandal could impact the economy:

[ Scandals Impact on the economy can be differed by its background and conductors, and in case the
purpose of the scandal is to earn both financial and political benefit, the possible impacts that could occur
for each type of scandal is both shown in mixed form.]

To verify the credibility of the hypothesis, it is required to compare and contrast how Korean political
scandal have had impact on the economy until now. Considering that the one of the ultimate purpose of
this paper was to predict the long-term impact this particular incident will produce upon koreas economy,

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in this step of comparison of scandals long term impacts of past scandals will be used as an information
source - supporting basis to build up prediction of long term impacts. To confirm that Korean political
scandal shows aspects of both types of scandals, Korean political scandal and the previously mentioned
two will be compared in the perspective of the aftermath.

Short Term

Resignation of President Nixon

Various government officials charged
Watergate guilty
Rise of Gerald Ford
Trust on government lessened
Loss of seats for republicans

Creation of foreign corrupt practices act

Lockheed goes near bankrupt
Lockheed Miki takeo falls and Fukuda replaces the
seat of prime minister

Impeachment of President Park

Arrest of Jae Yong Lee
2016 Korean Scandal Increase of uncertainty in Business
Increase of possibility of being selected as
currency manipulator

As it can be seen, Korean Scandal did not result in an entirely same impact, but have ended up with
similar aftermath. For instance, Both Watergate and Lockheed have concluded with the replacement of
leadership - Nixon to Ford, Miki to Fukuda. Similarly, on March 10th President Park, the individual with
the highest authority, was removed from the presidential office as panel of judges has ruled unanimously

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that a December impeachment by lawmakers should be upheld, immediately ousting President Park
Geun-hye. This is a common factor of Shot void of leadership and replacement of authorities.

After the scandal, Korea have lost trust on the global society and have increased their economies
uncertainty, degrading their value as a business partner. Furthermore, various government officials who
have maintained silence about the connections and influence Choi holds upon Park have been arrested.
These political disaster can be easily seen in both scandals mentioned.

Furthermore, in terms of business not only korea have been degraded they have lost one of their economic
basis - Samsung. As Jae Yong Lee was arrested last Feburary, Samsung have fallen to the void without
leadership. In reaction to this unpredicted incident, Samsung is breaking apart. Of course, it must be
considered that Lee was under the process of inheriting the whole Samsung business from his father, and
this may have lead to even worse results than it could have been. As he have been aiming to collect
subsidiary companies and convert them into one mega-company, without his leadership it seems that
Samsung is tearing apart with subsidiary companies selecting different directions to move on. Moreover,
the stockholders meeting held March 24th have failed to present leadership - but once again have proved
the fact that without the leadership of Lee, Samsung will not be able to take another step. This impact is
similar to how Lockheed had gone nearly bankrupt, but is different from the point that this will be
followed by aggravation of economy in Korea. Unlike Lockheed, Samsung is one of the biggest company
in Korea - and fills up 13.83% of Korea GDP. IMF have even claimed that Korea is too dependent upon
Samsung. As Samsung has fallen to the void of leadership, it seems that Korea will suffer from the
aftermath of losing a financial drive.

By this analysis, it can be known that Korean political scandals short - term impact on the economy are
very much alike to both types of scandals. This kind of result implies that the hypothesis have been
experientially supported.

Next, after i have confirmed that the hypothesis is correct i moved on to apply the hypothesis to predict
the long-term impact the korean political scandal can have on the economy in the future.

Long Term

Watergate Trust in politicians lessened

New laws constructed
Ethics in government act
Freedom of information act
National emergencies act

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Rise in investigative reporting and

journalism ( Washington post )

Lockheed Lockheed is merged with martin, decrease

of sales.
Tokyo prosecution gains popularity and
trust
Rise in Journalism ( Bungeishunju )
Liberal democrats make a coalition with
Liberal Club party.

2016 Korean Scandal ?

Assuming that the hypothesis is correct, it can be implicated that the long term impact of Korean Scandal
would be a combined form of two types of scandal. What both types of scandal held as their Long - term
impact were the following:
Void of leadership / Degradation of politicians
New laws of limitation and restriction passed
Rise in journalism and certain press
Downfall of Scandal conducted Company
Investigative organization gain political power

But before prediction is done, there are some exclusive backgrounds that may differ the results of
prediction. For instance, Law enforcement authorities such as prosecution office were considered to be
manipulated by Choi, thus did not gain popularity after the case. But on the other hand, degradation of
politicians were conducted easily. These kinds of circumstances shall be considered.

In conclusion, the prediction of the long term impact can be summarized in these four impacts:
Void of leadership / Degradation of politicians
New laws of limitation and restriction passed
Rise in journalism and certain press
Downfall of Scandal conducted Company

1. Void of Leadership

Due to the impeachment and arrest of President Park, Korea is currently governed by government of

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Hwang Kyo-ahn. But despite the fact that the government is runned by Hwang, the impeachment of
president Park will eventually degrade Koreas business opportunities. This can be predicted by the fact
that both Lockheed and Watergate have shown aspect of aggravation in economy after the replacement of
the leader. I believe that the sudden replacement of leader creates uncertainty on the nation, thus leads to
decrease of investment on the nation from the global market. This was also shown after Trump was
elected as the president of the united states, too. Thus, it can be defined that after a sudden of change of
government, economy can fluctuate, and in case the reason of the governments change is a Scandal,
fluctuation of the economy turns to rather negative direction.

2. New laws of limitation

In case a political scandal was directly connected to economy, the scandal will be related to either bribery
or fraud. And as i am discussing of political scandals related to the highest authority - either prime
minister or the president, presenting the scandal to the public does not only decrease trust against
government officials from the public, but also gives impression of distrust to the global market. Thus it is
obligatory for the government that have replaced the past government to create new laws to limit/avoid
the origin of the scandals. But even after the nation goes through the process of prevention, the result of
which that they have been degraded in the global market, and now have less possibilities of arranging
deals between nations remains. Thus, leaves negative impact upon the economy of the nation.

3. Rise in Journalism

As Bungeishunju and Washington have done through their reporting of scandals, journalism experiences
sudden increase of popularity after reporting Scandals. In this particular scandal, the company that
experienced more benefit than others through reporting the Scandal was the primary investigator, JTBC.
Through JTBCs report of presenting information of Choi Soon Sils tablet PC, 2016 Korean political
Scandal was shown to the public. Thus, JTBC was praised to be the company who laid justice upon the
evil politicians. Chairman of JTBC, Suk hee Lee became popular as a celebrity, and investigative
journalisms popularity increased. Ultimately, the rise of journalism brought economic impact of i) Value
Increase of the primary reporting company of the Scandal, and ii) Decrease in publics consuming on
leisure and hobby

4. Downfall of Samsung

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Downfall of Samsung will result in recession or aggravation of the current economy. Samsung plays
major role in developing GDP of korea currently. But as Samsungs future leader and the current Top
shareholder, Jae yong Lee Was arrested due to his connections to the scandal, it is predicted that Korean
GDP will gradually decrease. Furthermore, as we are uncertain of how long Samsung will have to operate
without a control tower, uncertainty of Samsung increase every second. This worry have been shown on
the Samsung Stockholders meeting in March 24th, by Stockholders being unable to conduct any further
conversion of the company. Despite their evolution in technology, it is predicted that Samsung will
experience decrease of value as business partners until their control tower returns or is replaced.

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