Samsung’s Lee Jae-yong acquitted in accounting fraud case

Samsung’s Lee Jae-yong acquitted in accounting fraud case

A South Korean court on Monday acquitted Lee Jae-yong, Samsung’s top executive, of charges of stock price manipulation and accounting fraud, the latest twist in the billionaire’s legal troubles over a merger that left him helped secure control of the country’s largest company.

A Seoul District Court judge said there was not enough evidence to prove prosecutors’ charges against Mr. Lee and 13 other current and former Samsung officials, including the accusation that the original intention of the merger was to strengthen Mr. Lee’s power over the company. conglomerate, against the business interests of each merged Samsung subsidiary.

Prosecutors had requested a five-year prison term and a 500 million won fine for Mr. Lee, 55. He has denied any wrongdoing. Prosecutors have the option to appeal the decision to a higher court. Neither Samsung Electronics nor the prosecution immediately commented on the verdict.

Mr. Lee’s lawyers said in a statement that the ruling “clearly upheld the legality” of the merger and the accounting of its subsidiaries.

Samsung is the largest and most successful of the South Korean conglomerates known as chaebol. The group’s electronics arm, Samsung Electronics, alone accounts for around a sixth of the country’s exports. Mr. Lee, also known as Jay Y. Lee, is the richest individual in South Korea according to Bloomberg News, which estimated his net worth to be around $9 billion.

Some South Koreans speak proudly of the chaebols for helping transform the country from a war-ravaged agrarian economy into a global export powerhouse. But others increasingly wonder whether they are stifling small businesses or making corrupt deals with government officials without facing enough repercussions.

Most chaebol-related scandals stem from attempts by families to ensure that the next generation inherits control, for example by having descendants buy shares in subsidiaries at discounted prices.

South Korean business experts said they were surprised by Monday’s verdict, which they said raises concerns about the fairness of the country’s markets and the credibility of its justice system.

“This case confirms a justice system that is more backward than in the past,” said Sung-In Jun, an economics professor at Hongik University in Seoul, “and how powerless South Korean political and judicial authorities are in the face of in government.” chaebol.

Mr Lee’s legal troubles began when massive protests in Seoul led to the 2016 impeachment of former President Park Geun-hye, accused of collecting or seeking bribes from Samsung and other chaebols and having abused his power. Ms. Park was imprisoned in 2017, pardoned and released in 2022.

Mr Lee was arrested in 2017 on charges of bribing Ms Park and her confidant, Choi Soon-sil, to gain government support for a 2015 merger of two Samsung subsidiaries, at the center of the corruption scandal. . He was vice president of Samsung Electronics at the time.

Prosecutors said the merger was a step in Mr. Lee’s efforts to transfer control of Samsung to his father, Lee Kun-hee, who was incapacitated following a heart attack in 2014 and had been convicted and twice pardoned for corruption and tax evasion years before. . A New York-based hedge fund, Elliott Management, launched a campaign calling on shareholders to vote against the merger. But the country’s National Pension Service, which was a major shareholder in one of the subsidiaries, voted to approve the merger in exchange for bribes from Mr. Lee, prosecutors said.

In 2017, a Seoul district court sentenced Mr. Lee to five years in prison for offering 8.9 billion won in bribes to Ms. Park and Ms. Choi.

His case worked its way through the justice system over the next two years, with the Seoul High Court reducing his sentence and releasing him from prison in 2018. The country’s Supreme Court ordered a retrial in 2019.

While awaiting retrial in 2020, Mr. Lee was charged with stock price manipulation and accounting fraud., the case whose verdict was announced on Monday. But prosecutors were unable to arrest him because a court refused to issue an arrest warrant.

Prosecutors had accused Mr. Lee and other current and former Samsung officials of committing the crimes during the 2015 merger. His lawyers said the merger took place according to the law.

In the 2021 corruption retrial, the Seoul High Court sentenced Mr. Lee to two and a half years in prison, estimating that the bribes totaled 8.6 billion won.

Later that year, the Justice Department conditionally released him and 800 other prisoners on a holiday commemorating the end of Japanese colonial rule over Korea at the end of World War II . South Korea often grants parole or pardons to prisoners on important national holidays.

Business analysts were divided on whether Mr. Lee’s prison stint was having an impact on his empire. Samsung Electronics became the world’s most profitable technology company while he was in prison. Others said Samsung was postponing key decisions with Mr. Lee in prison and lagging behind rivals like TSMC.

At the time of his release in 2021, he was still banned from employment at Samsung for five years. This was lifted in 2022 when he won a pardon from President Yoon Suk Yeol, who as prosecutor had led the investigation into Mr Lee.

Two months later, Samsung Electronics named Mr Lee executive chairman, appointing him less than 15 months after his release from prison on corruption charges.

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David B.Otero

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