March 3, 2024

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Samsung's Lee Jae-yong acquitted in securities accounting fraud case

Samsung's Lee Jae-yong acquitted in securities accounting fraud case

A South Korean court on Monday acquitted Samsung CEO Lee Jae-yong of charges of stock price manipulation and accounting fraud, the latest development in the billionaire's legal troubles linked to a merger that helped him secure control of the country's largest company.

A Seoul District Court judge said there was insufficient evidence to prove prosecutors' charges against Mr. Lee and 13 current and former Samsung officials, including the accusation that the primary purpose of the merger was to strengthen Mr. Lee's power over the company. A conglomerate, against the business interests of each Samsung subsidiary that was merged.

Prosecutors had demanded a five-year prison sentence and a 500 million won fine against Mr. Lee, 55. He has denied any wrongdoing. Prosecutors have the right to appeal the decision to a higher court. Neither Samsung Electronics nor the Public Prosecutor's Office immediately commented after the ruling.

Mr. Lee's lawyers said in a statement that the decision “clearly confirmed the legality” of the merger and the accountability of its subsidiaries.

Samsung is the largest and most successful South Korean conglomerate known as the chaebol. The group's electronics arm, Samsung Electronics, alone accounts for about one-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 His net worth was estimated at about $9 billion.

Some South Koreans speak proudly of the chaebol because it helped transform the country from a war-torn agricultural economy into a global export powerhouse. But others are increasingly scrutinizing whether they are stifling small businesses or cutting corrupt deals with government officials without facing sufficient repercussions.

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Most chaebol scandals were caused by families' attempts to ensure that the next generation inherits control, such as arranging to buy shares of subsidiaries at discounted prices.

Business experts in South Korea said they were surprised by Monday's ruling, which they said raises concerns about the fairness of the country's markets and the credibility of the judiciary.

“This case underscores that the judicial system is more backward than it was in the past, and how powerless South Korea’s political and judicial authorities are to the government,” said Song In-joon, a professor of economics at Hongik University in Seoul. “Chaebol.”

Mr. Lee's legal troubles began when mass protests in Seoul led to the impeachment of former President Park Geun-hye in 2016 on charges of collecting or demanding bribes from Samsung and other corporate giants and abusing her power. Ms. Park was imprisoned in 2017 and was pardoned and released in 2022.

Mr. Lee was arrested in 2017 on charges of bribing Ms. Park and her close friend, Choi Soon-sil, to gain government support for the 2015 merger of two Samsung subsidiaries at the heart of a 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 from his father, Lee Kun-hee, who suffered a heart attack in 2014 and was twice convicted and pardoned on bribery and tax evasion charges for years. before. New York-based hedge fund Elliott Management launched a campaign urging shareholders to vote against the merger. But the country's National Retirement Authority, which was a major shareholder in a subsidiary, voted in favor of the merger in exchange for bribes from Mr. Lee, prosecutors said.

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The Seoul District Court in 2017 sentenced Mr. Lee to five years in prison on charges of offering bribes worth 8.9 billion won to Ms. Park and Ms. Choi.

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

While awaiting retrial in 2020, Mr. Lee was indicted on charges of stock price manipulation and accounting fraud., The case in which the ruling was announced on Monday. But the prosecution was unable to arrest him because the court refused to issue an arrest warrant.

Prosecutors accused Mr. Lee and other current and former Samsung officials of committing those crimes in the 2015 merger. His lawyers said the merger was conducted in accordance with the law.

During a retrial on bribery charges in 2021, the Seoul High Court sentenced Mr. Lee to two and a half years in prison, finding that the bribes totaled 8.6 billion won.

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

Business analysts were divided over whether Mr Lee's time in prison had an impact on his empire. Samsung Electronics became the world's most profitable technology company while he was in prison. Others said Samsung was delaying key decisions with Mr. Lee in prison and had fallen behind rivals such as TSMC.

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At the time of his release in 2021, he was still banned from working at Samsung for five years. This was lifted in 2022 when he was granted a pardon by President Yeon Suk-yeol, who had led the investigation into Mr. Lee as a prosecutor.

Two months later, Samsung Electronics appointed Mr. Lee as chief executive, and he was promoted less than 15 months after his release from prison on bribery charges.