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April 23, 2021

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Samsung boss stands trial over stock manipulation in merger

Source: AFP | 00:14 UTC+8 April 23, 2021 | Print Edition

The jailed de facto leader of the giant Samsung group went on trial yesterday over a stock manipulation case that effectively puts South Korea’s system of conglomerate control in the dock.

Samsung — whose flagship subsidiary is among the world’s biggest smartphone and computer chip makers — is by far the largest of the family-controlled empires known as chaebols that dominate business in South Korea, the world’s 12th-largest economy.

Chaebol families often have only a small ownership stake in their empires, but maintain control through complex webs of cross-shareholdings between units.

Lee Jae-yong, vice chairman of Samsung Electronics and the grandson of the group’s founder, is accused of stock manipulation, breach of trust and other offenses when two other subsidiaries, Samsung C&T and Cheil Industries, merged in 2015.

Lee — who had emergency surgery for appendicitis last month, delaying the proceedings — looked gaunt in court, reports said, and wore a dark suit with a white shirt. Lee was the largest shareholder in Cheil Industries, and critics say Samsung sought to artificially lower the price of C&T to give him a bigger stake in the merged entity — a key part of the Samsung structure — consolidating his grip on the conglomerate ahead of his father’s death last year.

His lawyers have previously said that everything he did in connection with the merger was legal.

Lee is already serving a two-and-a-half year prison sentence for bribery, embezzlement and other offenses in connection with the corruption scandal that brought down former South Korean president Park Geun-hye.

Samsung is crucial to South Korea’s economic health, and is active in sectors ranging from construction to healthcare to insurance. But Vladimir Tikhonov, professor of Korean Studies at the University of Oslo, said: “The most problematic aspect is the attempted continuation of the unchallenged dynastic rule over a company which is responsible over 20 percent of South Korea’s GDP.

“Samsung’s main stakeholders are its shareowners, including the minor ones, its workers and South Korean society as a whole. “It is too big to be a dynastic property,” he said.

Lee’s father, Samsung chairman Lee Kun-hee, died in October, leaving his heirs a vast fortune and an inheritance tax bill of around 13 trillion won (US$11.7 billion), with the first installment due by the end of April.

Lee apologized last May for some governance issues at the group, pledging to ensure “there will be no more controversy over the succession” and that he would not allow his children to take over from him at the firm.

In the past, some chaebol leaders convicted of various offenses have subsequently received presidential pardons in recognition of their economic roles.

And a business grouping whose members include the leaders of the second-biggest chaebol Hyundai Motor and steel firm POSCO, ranked sixth, last week called for a special pardon for Lee, saying his absence would bring “adverse effects to the South Korean economy and industry as a whole.”

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