Samsung's alleged corruption mess

THERE are three things South Koreans cannot avoid: death, taxes and Samsung.

The Samsung Group, the country's largest conglomerate, runs hospitals where Koreans are born, apartments for raising families, funeral halls for deaths and just about everything else in between.

Best known for Samsung Electronics, the world's top maker of LCD screens and memory chips, the Samsung Group had sales in 2006 of $US159 billion ($181.13 billion), about equal to one-sixth of the country's gross domestic product.

With almost 60 affiliates, it accounts for about one fifth of the country's exports and stock market value.

Welcome to "The Republic of Samsung."

"Samsung's influence surpasses the economic level and reaches out to influence politics, society, culture and even ideology," said Kim Sang-jo, executive director of Solidarity for Economic Reform, which is calling for better corporate governance.

But according to a former top Samsung legal executive, it is a corrupt place where the company kept a slush fund of nearly $US220 million to bribe public officials so they would not pry too deeply into its management practices.

This week, prosecutors widened a probe into Samsung by banning more of its executives from travelling overseas and raiding affiliates to look for incriminating documents.

Samsung has vehemently denied the allegations and issued a detailed rebuttal of the claims made by the former executive Kim Yong-cheol, who left the company in 2004 and waited three years before blowing the whistle on corruption.

Samsung, which means "three stars," is South Korea's best-known brand as well as its flagship firm for global success.

Samsung has faced corruption investigations before and mostly emerged unscathed, but having allegations made by someone who was privy to the group's inner workings is new.

The investigation comes just ahead of the country's December 19 presidential election, where corruption has been a heated issue, and could spill over into the April election for parliament.

Baseball, phones and power Samsung, founded in 1938 as a trading company, is one of the family-owned conglomerates called "chaebol" that formed cosy ties with the government to raise the country from the ashes of the 1950-1953 Korean War and into the world's 13th largest economy.

Often these ties have been too cosy and led to accusations of endemic corruption in South Korean business.

Some of the highest ranking chaebol leaders have been found guilty of corruption but given token sentences amounting to a slap on the wrist with judges saying that harsh penalties would deprive key companies of irreplaceable leadership.

The group was the only one of the major chaebol to escape massive government restructuring after a financial crisis gripped the country a decade ago.

It has also seen laws originally designed to diminish its power watered down so as not adversely impact one of the country's largest employers.

"If Samsung's business started to shake, ordinary people would feel the effects," said Sung Tae-yoon, an economics professor at Yonsei University.

The list of Samsung products and services is dizzying. It makes mobile phones, clothes and precision glass. It provides credit cards, insurance and economic advice for the government. It runs hotels, a baseball team and the country's biggest amusement park.

And it is with the amusement park operator called Everland that the group's power rests, analysts say.

The family that runs the Samsung Group maintains its influence through a complicated network of cross shareholdings among group companies. At the top of the structure is unlisted Everland, which serves as the de facto holding firm.

In October 2005, a Seoul court found two former top group executives guilty of conspiring in a 1996 deal to help the children of Chairman Lee Kun-hee, the country's richest person, buy a majority stake in Everland at below-market prices.

Son Lee Jae-yong, also known as Jay Y. Lee, who is considered as being groomed to take over, is South's Korea's fifth-richest person with a net worth of $US1.7 billion, according to Forbes magazine.

Samsung has warned that the latest probe could upset its business operations but some analysts said the investigation could shed welcome light on the group's secretive management.

South Korean shares have traditionally traded lower than those in other industrial nations because of corporate governance problems, an element of what is known as the "Korea discount."

"This could be a great opportunity for Samsung to improve its transparency," said Lee Min-hee, an analyst at Dongbu Securities. "Foreign investors are not fazed by the current investigation, and in fact could be buying even more Samsung shares on expectations of improved governance."

Jon Herskovitz in Seoul AustralianIT December 12, 2007

India the new China, says Austrade

THE federal Government's key export promoter has urged local companies to tap into India's $18.5 billion IT market.

Munish Sharma, Australian Trade Commission senior export adviser for ICT, said the Indian market is ripe for the picking.

"People have the perception that Australian companies have nothing to offer Indian firms and consumers. This is wrong. Local technology companies are highly regarded there," Mr Sharma said.

He said partnerships with India-based companies such as Infosys, Satyam, Tata Consultancy Services and Wipro - which have operations around the world - could lead to Australian technology being used the world over.

"This means the opportunities for your product is not limited to the Indian domestic market," Mr Sharma said.

India's peak IT software and services body Nasscomm is holding its 16th India Leadership Forum in Mumbai next February and Austrade has encouraged local companies to attend.

Austrade and the Australian Information Industry Associationn (AIIA) plan to jointly lead trade mission to the event.

Mr Sharma hopes to attract between 15 and 20 companies to the leadership forum. Last year 10 local companies attended.

Austrade is also organising special pitching sessions for those attending the conference. "We'll take them to meet with systems integrators and resellers in Bangalore and New Delhi as well," he said.

Mr Sharma cited four key areas of focus for local companiess looking to penetrate the Indian market - telecommunications, retail, construction and financial services.

"Technology is used in every facet of life. For example, India has over 230 million mobile phone subscribers and they're adding six million new customers each month."

Austrade and Nasscom were keen on creating more partnerships between Indian and Australian companies. He welcomed Tata Consultancy Services' recent agreement with NSW TAFE to run some of the technical college's courses in India.

He cited the example of Canberra-based ContentKeeper Technologies which sealed an agreement with HCL Infotech, India's largest systems integrator, after a pitching session last year.

India ranks among the top 10 nations in the world for ICT. Its IT software and services market was worth $US40 billion ($46 billion) between 2006 and 2007. Nasscom said that this was expected to grow 31 per cent to reach $US48 billion, by the end of 2008.

Fran Foo AustralianIT December 19, 2007

ANZ Bank ups the ante in India

TECHNOLOGY and offshoring will be central to the ANZ Bank's goal of doubling profits over the next five years.

"We will do more to further integrate and expand our operations in Bangaloree ... to reduce cost and foster innovation and improve service. This will free up time for staff in Australia and New Zealand to focus on taking care of our customers," ANZ Bankk CEO Mike Smith said.

"We don’t aspire to just be equal, but attempt to better some of what the global leaders in this field have achieved. We’ll get there by sharpening our focus on segment base marketing and making changes in the way we use technology," Mr Smith said.

He was speaking at an investor briefing before the bank's annual general meeting in Perth today. "2008 will be more about putting in building blocks for the next few years.

"Can I just reassure you again, we are going to be very disciplined in what and how we do this, we will do what makes sense financially and it will make sense strategically and I’m confident our shareholders will be well rewarded."

ANZ will continue to pursue higher levels of customer service by giving its customer service representatives access to all instances of a customer's interaction with the bank, he said.

There would also be more emphasis on the online world.

"To become truly customer centric requires continual investment in technology so that it becomes a source of competitive advantage for us rather than just a means for keeping the doors open.

"Successful companies will blend the cyber world with the physical world ... we want to increase traffic whether on anz.com or through our branches," he said.

ANZ's institutional business has lagged its competitors in recent years, and Mr Smith identified poor investment in technology as one of the reasons behind this.

"We really should have done better than what we have. Our growth in 2007 was six per cent, compared to a peer average of 15 per cent.

"We’ll be investing more in the likes of cash management platform and markets platform. We expect to see a better revenue outcome here in 2008, and even though we still need to make some investment to fix some legacy issues (in institutional banking), it should deliver a better bottom line performance. I think the real payoff will be in 2009 and beyond."

ANZ has set a goal of doubling its profits in five years, and said a big part of this would be achieved by growing earnings from Asia.

Mahesh Sharma AustralianIT December 18, 2007

Telstra wins right to fire sex romp girl

TELSTRA has won the right to sack a young female employee over an alcohol-fuelled after-hours sex romp, reigniting debate about the line between work and private lives.

The Industrial Relations Commission yesterday upheld Telstra's appeal against an earlier ruling that Carlie Streeter be reinstated and paid compensation for being unjustly sacked following the romp last February.

Ms Streeter is considering appealing to the Federal Court, with her lawyer last night describing the 2-1 decision by a commission full bench as "un-Australian".

"The client is very aggrieved by the decision," Ms Streeter's lawyer, Kelly Durant, told The Australian. "If (it) stands, it really is a serious licence for employers to intrude on the private lives of their employees and it's very un-Australian.

"What this decision says is employers can control and regulate the private lives of employees, which is completely unfair. At the end of the day, what you do at two o'clock on a Sunday morning is really nothing to do with your employer."
Telstra released a brief statement last night in which it said it was pleased the full bench had upheld the corporation's appeal.

Telstra dismissed Ms Streeter last March, claiming she sexually harassed three female colleagues by having sex metres from where they were sleeping on a hotel room floor.

She was accused of sexually harassing another female employee by being naked in the hotel bath with two Telstra male workers. Telstra also claimed she dishonestly answered questions during a subsequent company investigation into the incident.

The incidents occurred in the early hours of February 25 following a belated Christmas party for staff from the Telstra retail outlet at Westfield Shopping Town in Miranda in Sydney's south. In August last year, commission senior deputy president Jonathon Hamberger ruled that Ms Streeter had been unjustly sacked.

Although the employees were upset by Ms Streeter's conduct, he found it was not enough to constitute sexual harassment.

Mr Hamberger, a former Howard government employment advocate, ruled the sexual conduct took place in a hotel room with the lights out in the early hours of the morning, when Ms Streeter thought the other employees were asleep. He ordered her to be reinstated and awarded compensation.

But the majority full bench decision upheld that Telstra was justified in sacking Ms Streeter because of her "dishonesty" during the subsequent investigation into her conduct.
Interviewed by Telstra management in February last year, Ms Streeter initially denied engaging in sexual activity, then said she could not really remember and that she might have been affected by alcohol "to the point she could not remember anything". In subsequent evidence to the commission, Ms Streeter conceded she had sex with a male employee but had previously denied it because she was embarrassed.

Mr Hamberger found that most of Telstra's concern related to her alleged sexual harassment of employees. He said the conduct about which Ms Streeter "lied" was of an inherently personal nature, and it was not enough to destroy the necessary relationship of trust between an employer and employee.

However, the full bench upheld Telstra's argument that Mr Hamberger erred in finding that Ms Streeter's dishonesty did not constitute a valid reason for her dismissal.

Ewin Hannan News.com.au January 25, 2008

Victoria's $500m Myki card blow-out

VICTORIAN taxpayers face a massive bail-out of the troubled $500 million public transport smartcard after the developers warned they needed more money.

Consortium Kamco has told the Transport Ticketing Authority it needs a cash injection to get the card operational.

Kamco has also asked for changes to the contract to allow it to receive accelerated payments from the TTA.

The news comes just a week after the Herald Sun revealed investigators in the Auditor-General's office had uncovered serious probity concerns in the awarding of the contract to American IT firm Keane's Kamco consortium - many of which were left out of the final report by Auditor-General Des Pearson.

The tender was let in 2005 and the plastic smartcard known as myki was due to be operational by March this year.

However, continuing computer problems have meant a roll-out won't begin until at least June 2008 - 15 months behind schedule.

The IT company that forms part of the consortium, ERG, is also responsible for the Sydney smartcard, known as the Tcard, which is already eight years behind schedule and not due to be fully operational for at least another two years.

The TTA confirmed talks were under way but both the TTA and Kamco refused to say how much money Kamco had asked for.

TTA spokeswoman Helen McInerney confirmed talks were continuing between TTA and Kamco.

"In any major project there will be a range of discussions held regarding finances and project delivery," she said.

"These sorts of discussions include variations and other normal contract issues.

"From the outset, a range of discussions have occurred between Kamco and the TTA, and these are expected to continue for the duration of the period."

Kamco spokeswoman Margo Nison said she was unable to discuss payments, as the subject was commercially sensitive.

"Progress continues to be made to deliver the right solution to meet Victoria's unique requirements," Ms Nison said.

"Elements of the software development required additional time and the right thing to do is get the solution right. Progress has been made which enabled environmental testing to commence last month.

"Kamco remains committed to working with the TTA to get the ticketing system right."

Opposition transport spokesman Terry Mulder said the Government needed to make a hard decision.

He said they would either have to hand over the money or face the embarrassment of the project going "belly-up". "Kamco must be held to its original tendered price. If it is handed millions of taxpayer dollars, losing bidders would have every right to be outraged and to claim that they were dudded in the tender process."

During the controversial tendering process, the TTA negotiated back and forward between bidders and, according to reports by the Auditor-General, succeeded in getting the price reduced by 30 to 40 per cent.

There are now real fears within the Department of Infrastructure and the Government that the price may be too low, and the Government may have to stump up millions of dollars to ensure the project stays on track.

The 2005-06 TTA annual report shows that Kamco was paid $10.6 million in fixed service delivery charges and a further $31.4 million for project delivery.

Ellen Whinnett Herald Sun December 24, 2007

Telstra settles class action suit

UP to 29,000 Telstra investors will share in about $3.7 million, after the Federal Court approved the settlement of a class action by shareholders against the telco.

A group led by shareholder, Andrew Taylor, sought up to $300 million from Telstra, on the basis they were denied market sensitive information when they purchased shares between August 11 and September 2, 2005.

The investors argued they should have been privy to a briefing Telstra gave the federal government, in which the company discussed declining fixed line revenue and under investment.

Telstra has insisted all along it did not breach continuous disclosure obligations, but said it was in the best interests of its shareholders to settle the case rather than fight it out in court.

Law firm Slater & Gordon will receive $1.25 million for its services.

It was approved yesterday by Justice Peter Jacobsen. "I've come to the view that ... the overall settlement is fair and reasonable and I propose to approve it,'' Justice Jacobsen told the court.

A handful of affected shareholders from the August-September 2005 period opposed the settlement, unhappy with its size and the proportion going to Slater and Gordon.

"Looked at in isolation, it seems a large amount,'' Justice Jacobsen observed, of Slater and Gordon's fees.

''(But) a substantial amount of work has gone into the case,'' he said, noting that Slater and Gordon's costs had actually exceeded the $1.25 million the firm will receive. Telstra seized on the approval as evidence the case should never have gone to court, saying it never had merit.

"We've had to pay out an amount of money to have an issue that should never have been litigated go away, pleasingly in this case ... Slater and Gordon has not recovered its fees," Telstra's group general counsel, Will Irving said.

But Slater and Gordon hailed the settlement as historic, the first time a company had compensated shareholders over disclosure issues.

"The settlement puts big businesses like Telstra on notice that they can't keep shareholders in the dark by failing to disclose important information about their true financial state,'' Slater and Gordon executive director Ken Fowlie said.

Nick Lucchinelli AustralianIT December 14, 2007

Neighbours dob in water cheats

ALMOST 1000 Melburnians face $429 fines after being given final warnings for wasting water.

And many can blame neighbours who are dobbing in those splurging on diminishing supplies.
Water wasters are being threatened with fines and disconnection in a bid to manage storages.
Figures obtained by the Sunday Herald Sun reveal there are 969 Melburnians on second and final warnings. If caught again they will become the first people in Melbourne to be fined or convicted for water waste, the State Government says.
Water authorities have issued 756 first-warning letters and 114 final warnings over the past month. Offenders could have their water turned off and face charges in a crackdown on people flouting 3A restrictions.
Since the restrictions were introduced in April, more than 5180 water cheats have been caught.
Among the cases:
HUNDREDS of people have been found watering lawns and gardens outside dedicated hours.
NEIGHBOURS dob in each other for washing cars and using sprinklers.
Water authorities and the Government have until now focused on education rather than punishment. But with water storages below 40 per cent and dry months ahead, Water Minister Tim Holding said tough measures were needed to protect reserves.
Only Mark Raymond Hogan, of Cranbourne, has been convicted of a breach of water laws, but he was charged with theft, not breaches of waste laws.
He admitted siphoning off millions of litres to fill a dam and received a suspended sentence with no fine.
The Government has funded more than 140 patrol officers and 90 vehicles to oversee restriction breaches.
Melburnians are using 28 per cent less water than they were 10 years ago.
Stage 3A restrictions are expected until at least the end of June

Peter Rolfe Herald Sun December 16, 2007

Labor swift to dump Access Card

THE Labor Government has moved quickly to scrap the Howard administration's controversial $1.1 billion Human Services identity card.

The federal Government has shut down the Office of the Access Card and closed its website, honouring its election promise to scrap the controversial program.

The $1.1 billion project - intended to provide every Australian with a unique health and welfare number and biometric photo on a smartcard - opened a year ago, with two key tenders attracting strong bids from IT and card supply companies keen to secure a role.

The project has languished since mid-year, after an all-party Senate committee rejected the draft enabling legislation as wholly inadequate and lacking in protections against the card's use as a de facto identity card.

Bidders are understood to have spent millions on preparing their tenders for systems integration and card issuing; while the department spent more than $50 million on consultants, administration and advertising.

The Howard government also spent an undisclosed amount on establishing the Consumer and Privacy Taskforce to manage public consultation; its resulting reports provided recommendations that were ignored by the then minister, Senator Chris Ellison.

One participant notes with frustration the "diverted efforts from other agencies' activities, and the time wasted by people responding to the disordered consultation process".

However, the bulk of the cost lay in completing the processing and registration of some 18 million Australians while the card was rolled out over two years to 2010, and Labor plans to use these savings elsewhere.

The deadlines for the technical and administrative parts of the Access Card regime were widely seen to be highly ambitious and driven by a political timetable rather than a scheduled nationwide rollout.The scope of the project and card capabilities also varied wildly as former Employment and Workplace Relations minister, Joe Hockey, talked up plans for the private sector to piggyback applications on the smartcard for secondary, "consumer friendly" purposes.

AustralianIT, Karen Dearne December 07, 2007

Accenture consultants in 'idle' mode

ACCENTURE consultants are sitting idle in the lead-up to Christmas, following a decline in the company's workload on Telstra's $11 billion technology transformation program.

Accenture is one of two major systems integration partners for billing and customer systems projects, alongside fellow computer services player IBM Australia.

A source close to the transformation program said the consultants had been "benched" or left idle after a downturn in the firm's work with Telstra. This was in part attributed to reduced capital spending.

Up to 200 consultants were "on the bench", engaged in training while waiting for bookable work, the source said.

A spokesman for Accenture confirmed that some employees had been taken off Telstra projects, but declined to comment on the specific contracts that the company had with Telstra.

"Accenture and Telstra are continuing to work together in many areas of the transformation, as outlined at Telstra's recent investor day," the spokesman wrote in an emailed response.

"While we are rolling some people off the project, this is to be expected on large transformation projects and these resources will be used on other Accenture business."

The spokesman declined to discuss the number of Accenture consultants affected by the move.

A Telstra spokeswoman denied there had been cutbacks to its contracts and said that net spending with Accenture was on the rise.

"As with any contract with Telstra, Accenture is managing its staff profile to reflect the peaks and troughs in the work, and the various skills requirements," the spokeswoman said.

"For example, we've just delivered the 'in production' phase of our IT transformation, where the peak work activity for Accenture involved program testing."

Accenture has been working on Telstra's technology transformation since 2005, when it was commissioned to carry out a review of the telco's information systems and networks ahead of the planned project.

The systems integrator quickly struck controversy, however, when it was awarded a contract to revamp one Telstra billing system as part of a consortium that also featured Siebel and Kenan.

Accenture had run the selection process that ultimately anointed the winning consortium.

Telstra's billing and customer systems are being upgraded under a two-stage process that is due to be completed by the end of next year and will slash the number of software platforms used to run the carrier.

Phase one of the billing and customer systems upgrade was completed in October, but Telstra is reportedly tweaking the new applications under a reform program that will run into the new year.

Ben Woodhead Australian IT, December 18, 2007

Australian broadband among world's worst: OECD

The OECD has passed judgement on Australia's broadband in a study calling it among the slowest and most expensive in the world, however, Communications Minister Helen Coonan claims it was a "strong report card" for the nation's infrastructure.

The OECD (Organisation for Economic Co-operation and Development) Communications Outlook 2007 report found that Australia's broadband was among the world's most expensive and among the slowest.

The OECD report studied the average download speed for the incumbent telco -- in Australia's case Telstra -- in each of the 30 industrialised countries that are OECD members and found Australia second from bottom, beaten by the likes of Poland, Belgium and Mexico.
It doesn't seem to be dampening Aussies' enthusiasm for Web surfing, however, with the country rated as having the third highest Internet penetration in the OECD area, behind Sweden and Switzerland. However, the country only managed to scrape a middling ranking for DSL subscribers, with some 17 per 100 inhabitants at June last year.

"The quality of the Internet experience for entertainment, business and e-commerce depends upon bandwidth and ready availability," the OECD report notes.
As well as speed issues, the country is also experiencing some of the highest telecoms prices across the board, with small business fixed line bundles, SOHO fixed line bundles and some mobile phone plans found to be above the OECD average. Australians also make mobile providers more money than most other countries, generating US$634 per year per subscriber. The only other countries in the OECD area that spend more are Iceland at US$654 and Japan, at US$860.

Communications Minister Helen Coonan, however, preferred to concentrate on the upside of the report, such as Australia's relatively high level of domain name registrations per capita.
"This is an outstanding achievement considering the particular challenges of providing telecommunications access at fair prices over a vast continent with a small population,” she said in a statement.

Not everyone is convinced. David Forman, chairman of the Competitive Carriers Coalition, said that Australia should be ashamed of its performance.

"The countries we are keeping company with [in broadband] are not the countries we should want to be associated with. This is a problem that has been 20 years in the making and it's only going to get worse…. If we measure ourselves in isolation then yes, prices are falling, but they're not falling fast enough [compared with the rest of the developed world] and we're not catching up," he told ZDNet Australia today.

Forman said the country has not yet reached the competitive environment needed to bolster broadband -- a problem that the coalition believes can only be solved through the structural separation of Telstra.

Jo Best, ZDNET Australia, 17 July 2007

Telstra defines broadband boundaries

TELSTRA'S stoush with the competition regulator over the cost of broadband services has narrowed, with the telco giant submitting price undertakings that would cover only 70 per cent of Australia's population.

Telstra has proposed an access charge of $30 per month for Unconditioned Local Loop Service, which would allow customers to sign up to a rival telco for voice and broadband services without needing a Telstra phone line.
ULLS, also known as unbundled local loop service, effectively means Telstra's competitors would be able to use the company's own copper wire network to poach its customers.
However, no agreement has yet been reached on the price Telstra will be able to charge its rivals for access despite the network having been "declared" open to third-party access under the Trade Practices Act as long ago as 1999.
The ULLS proposal Telstra has lodged with the Australian Competition & Consumer Commission covers only metropolitan areas, leaving open the question of third-party access prices in rural and regional areas.
Telstra last year proposed a $30 across-the-board access charge for customers regardless of location, but this was rejected by the ACCC on the grounds that it did not accurately reflect the cost of providing the service.
The decision, which was challenged by Telstra before the Australian Competition Tribunal, was upheld in May this year.
A Telstra spokesman said yesterday that while Telstra had yet to formulate access prices for central business district, provincial and rural areas, customers in this last category would be forced to pay at least $100 per month due to the ACCC decision to reject its $30 flat charge plan.
The new price regime, which is proposed to apply until the end of 2010, is based on a confidential pricing system that Telstra refers to as its Efficient Access Model, which uses data on actual customer location and network structures rather than the previous plan, which relied on assumed customer characteristics.
Telstra has offered to share the model with competitors for assessment, subject to confidentiality arrangements being put in place.
The ACCC plans to issue a discussion paper seeking submissions on Telstra's undertakings and is scheduled to report its findings within six months.
However, Telstra's High Court challenge to the constitutional validity of the ACCC's power to force it to share its infrastructure with other providers, which is awaiting judgment, could make the entire process redundant if the court rules in favour of Telstra.

Blair Speedy December 28, 2007