Home > Opinion > Editorials

Samsung Chairman Lee Jae-yong off the hook

Published: 06 Feb. 2024, 20:04

Lee Jae-yong, chairman of Samsung Electronics, has been acquitted of all financial crime charges related to the controversial merger in 2015 of two Samsung companies allegedly to help his hereditary succession of Korea’s top conglomerate. The Seoul Central District Court on Monday delivered a ruling some three years and five months after the trial started, which found him not guilty in all 19 counts, including unlawful stock trade, negligence of duty and accounting fraud. Earlier, the prosecution asked for a five-year jail term and a fine of 500 million won ($374,953).

The case represents the prosecution’s initial refusal to comply with a non-binding recommendation to drop the case. The prosecution inevitably would face scorn for disrupting corporate activities with its stubborn push with the case now that all suspects have been acquitted.

Potential irregularities behind Samsung units were raised following the bribery and other corruption charges on impeached president Park Geun-hye in 2016. Lee — then vice chairman managing every day group affairs on behalf of his bed-ridden father, Lee Kun-hee — was accused of bribing the former president for her support for the merger of Samsung C&T and Cheil Industries. Lee was able to strengthen his grip over Samsung Group after the merger allowed him to become the largest shareholder in Samsung C&T with a 16.4 percent stake through the exchange of his shares in Cheil.

The prosecution accused him of sweetening the deal through stock price manipulation and other illegal means to facilitate his hereditary succession at a minimum cost. In July 2018, the prosecution expanded the case after finding accounting fraud at Samsung Biologics — a subsidiary of Cheil Industries — to help the merger. An investigation review board of the Supreme Prosecutors’ Office looked into the case at the request of Lee in June 2020 and recommended the prosecution stop the investigation and not indict Lee and others. But the prosecution went on to indict the Samsung men three months later.

The bench judged that the merger did not solely serve Lee’s succession and strengthening of command over the group. It disagreed with the charge that the merger ratio — 0.35 Samsung C&T shares against 1 Cheil Industries share — had disadvantaged shareholders.

Business management was impacted with the group leader distracted by the trial. Lee attended 95 out of 106 trials. While its competitors such as TSMC of Taiwan could make strides with big investments, Samsung was unable to strike a major merger and acquisition (M&A) since the 2017 acquisition of Harman International.

Now entirely free of judiciary risks, Samsung can accelerate M&A and investment activities for future growth. It must reemerge as one of the world’s most valuable companies. It must reinforce its competitiveness in chipmaking and high-tech to become a respectable corporate name.