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Samsung heir gets 5-year jail sentence

Lee Jae-Yong
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FT ONLINE

A court in South Korea has found Lee Jae-yong, the vice-chairman and de facto head of the country’s largest company, Samsung, guilty of corruption in a watershed moment for the east Asian nation as it seeks to roll back the excesses of its mighty conglomerates.

Mr Lee, arguably South Korea’s most powerful man, was sentenced to five years in jail after being convicted of a string of crimes, including bribery, embezzlement and perjury, in a case that had been dubbed the “trial of the century”.

The verdict on Mr Lee, heir to the Samsung crown, could prove a damaging blow to the company’s global reputation and long-term strategy.

The decision also raises questions about Mr Lee’s plans to officially take over the business from his ailing father, chairman Lee Kun-hee, who has been incapacitated since a heart attack in 2014.

Lawyers for the younger Mr Lee immediately pledged to appeal against the verdict.

It is also not uncommon in South Korea for business leaders to receive presidential pardons given the oversized role the conglomerates play in the nation’s economy.

While better known internationally for its smartphones, Samsung is a sprawling empire that permeates every aspect of life and business in the Asian nation.

The core Samsung Electronics affiliate alone accounts for more than 20 per cent of the main board of the country’s stock exchange.

Despite Mr Lee’s incarceration since February, its business has been booming. Last month, it overtook Apple to become the world’s most profitable technology company after raking in quarterly profits of $9.9bn.

It also recently eclipsed Intel as the world’s largest chipmaker — a title the US company had held since 1993.

But the conviction will raise questions about Samsung’s direction and whether the group should continue to be run as a family dynasty.

Prosecutors had originally sought a 12-year sentence for Mr Lee in a trial that was closely enmeshed with the case of former president Park Geun-hye, who is also now on trial.

Mr Lee was convicted after the court upheld charges that he offered or pledged millions of dollars to Ms Park and her shadowy confidante Choi Soon-sil in exchange for business favours.

Prosecutors successfully argued the bribes were used to secure government backing for a contentious merger between two Samsung affiliates that was crucial for Mr Lee to cement his hold on the organisation, but was widely criticised for not benefiting shareholders.

He was also convicted of hiding assets overseas, embezzlement and lying to the parliament under oath.

“This is a case where political power and business power colluded immorally. It won’t be easy for the public to regain trust in our institutions as these corrupt ties between the president and big conglomerates are still present, not something that happened in the past,” said judge Kim Jin-dong. “Especially, as the defendants are the representatives of Samsung Group, the negative impact that this case has on our society and economy is very big.”

Two other Samsung executives, Choi Gee-sung and Jang Choong-ki, were also convicted in the same trial and sentenced to four years in prison.

A verdict in Ms Park’s trial is expected in October.

The corruption scandal, which first came to light in October last year, exposed the deep-set ties between the country’s business and political elite and triggered mass demonstrations that culminated with the impeachment of Ms Park in March.

Since then, the country has elected a new leader, Moon Jae-in, who has pledged to crack down on corporate excess and cronyism, and focus on the wellbeing of ordinary South Korean citizens.

Following the verdict, Wu-cheol Song, Mr Lee’s lawyer, said:”As a legal professional, I cannot possibly accept any part of the lower court’s guilty verdicts . . . I am confident that the appeals court will definitely find the defendants not guilty on all counts.”

-NK

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