Samsung heir arrives at court for corruption verdict

August 25, 2017
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Samsung heir Lee Jae-Yong faces multiple charges including bribery, embezzlement and perjury/AFP

, SEOUL, South Korea, Aug 25 – The heir to the Samsung business empire, which includes the world’s biggest smartphone maker, arrived at court Friday to hear the verdict in his corruption trial over the scandal that brought down South Korean president Park Geun-Hye.

Prosecutors had demanded a 12-year sentence for Lee Jae-Yong, which could leave the giant firm rudderless for years and hamper its ability to make key investment decisions.

Overview
  • Lee, 49, faces multiple charges including bribery, embezzlement and perjury stemming from the scandal, centred on payments and promises by Samsung totalling 43.3 billion won (around $40 million) to Park's secret confidante Choi Soon-Sil.
  • Prosecutors say the money was in return for policy favours including government support for Lee's hereditary succession at the group after his father was left bedridden by a heart attack in 2014.

The vice-chairman of Samsung Electronics stepped from a justice ministry bus handcuffed, bound with white rope around his dark jacket, and carrying an envelope of documents as he walked into Seoul Central District Court

Lee, 49, faces multiple charges including bribery, embezzlement and perjury stemming from the scandal, centred on payments and promises by Samsung totalling 43.3 billion won (around $40 million) to Park’s secret confidante Choi Soon-Sil.

Prosecutors say the money was in return for policy favours including government support for Lee’s hereditary succession at the group after his father was left bedridden by a heart attack in 2014.

The defence says it was pressured by Park to make the donations under duress and that Lee was not aware of them and did not approve them. Four other top Samsung executives are also on trial.

The demonstrators who mounted giant candlelit protests against Park last year also targeted Lee and other chiefs of the chaebols, as the family-controlled conglomerates that dominate Asia’s fourth-largest economy are known.

South Korea’s GDP is still growing but social and economic frustrations have mounted over the benefits not being equally shared.

Around 800 riot police were deployed around the Seoul Central District Court to prevent possible clashes between rival sets of demonstrators, the Yonhap news agency reported.

The court refused permission for the verdict to be broadcast live, in contrast to the Constitutional Court’s ruling on Park’s impeachment in March.

It was deluged with hundreds of applications for the 30 seats in courtroom 417 available to members of the public, which were allocated by lottery.

Park’s own trial began in the same room in May, and it also saw Lee’s father Lee Kun-Hee convicted of tax and other offences in 2008, receiving a suspended sentence.

‘Ruling family’

Chaebols have long had murky connections with political authorities in South Korea, and past trials of their leaders have often ended with light or suspended sentences, with courts citing their contributions to the economy.

“The court should not apply overly lenient standards to the chaebol,” the pro-business JoongAng Ilbo newspaper which used to be a part of the Samsung group said in an editorial ahead of the ruling.

“At the same time, it must not be swayed by unidentified civic groups that pretend to reflect public opinion,” it added.

The Lee clan directly owns about five percent of Samsung Electronics shares but maintains its grip on the wider group through a byzantine web of cross-ownership stakes involving dozens of companies.

One of the favours Lee allegedly sought from Park was state approval for a controversial merger of two Samsung units in 2015, seen as a key step to ensuring his accession.

The deal was opposed by shareholders who said it wilfully undervalued shares of one of the firms. But it eventually went through after the national pension fund a major Samsung shareholder approved it.

Lee has been Samsung’s de facto leader since his father fell ill, but his lawyers and ex-members of the former elite Future Strategy Office (FSO), which dictated the vast group’s overall direction and major business decisions, sought to portray him as naive and inexperienced.

He had “never attended a single one” of the weekly FSO-led meetings for the heads of Samsung units, Lee told the court, and “rarely expressed my opinions” on issues such as the merger. Instead he “mostly listened to other executives”, he said.

Analysts differ on the potential impact of the verdict and sentence on Samsung.

Major chaebol decisions on large-scale acquisitions or investments “are often endorsed by the patriarch of a ruling family”, said Chung Sun-Sup, the head of corporate analysis firm chaebul.com, and if Lee is given a long prison term the firm “may move more slowly than before”.

But Geoffrey Cain, the author of a forthcoming book on the group, said: “Samsung will not be doomed without Jay Lee. Even if he gets a prison sentence, Samsung will be just fine. It’s up to the specialists to make their own decisions.”

Samsung appears to have been unaffected by Lee’s absence so far he was detained in custody in February with flagship subsidiary Samsung Electronics making record profits on the back of strong demand for its memory chips.

Its shares have soared in recent months but were down 0.6 percent on Friday afternoon ahead of the verdict.

The ruling is seen as a strong indicator of the likely outcome in Park’s trial, as some of the charges against the ousted head of state her are inextricably linked to the accusations Lee faced.

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