Samsung Electronics Chairman Lee Jae-yong has been acquitted of financial crimes by a South Korean court, in a case that was related to a controversial merger in 2015 that consolidated his control over the country’s largest conglomerate. The verdict could ease the legal woes of the Samsung heir, who was pardoned for a separate bribery conviction last year.
Court Rejects Prosecution’s Charges of Stock Manipulation and Accounting Fraud
The Seoul Central District Court on Monday ruled that the prosecution failed to prove that Lee and other Samsung executives had manipulated the stock prices and committed accounting fraud in relation to the merger between Samsung C&T and Cheil Industries, two Samsung affiliates, in 2015. The court said that the merger was a legitimate business decision, and that there was no evidence that Lee had coerced or influenced the shareholders to approve the deal.
The prosecution had sought a five-year prison term for Lee, who had denied any wrongdoing. The prosecution had argued that Lee and his associates had artificially inflated the value of Cheil Industries, a Samsung subsidiary that Lee owned a stake in, and deflated the value of Samsung C&T, another Samsung subsidiary that was the largest shareholder of Samsung Electronics, the crown jewel of the Samsung group. The prosecution had claimed that the merger ratio of 1:0.35, which favored Cheil Industries over Samsung C&T, was unfair and designed to increase Lee’s stake in Samsung Electronics.
The court, however, dismissed the prosecution’s arguments, saying that the merger ratio was based on reasonable and objective assessments by independent appraisers and advisers, and that the shareholders had the right to accept or reject the deal. The court also said that the prosecution had failed to show that Lee had used his influence or power to sway the shareholders, and that there was no causal link between the merger and Lee’s succession plan.
Verdict Could Ease Lee’s Legal Troubles and Boost Samsung’s Business Prospects
The acquittal could ease the legal troubles of Lee, who had been embroiled in a series of scandals and lawsuits since he took over the leadership of the Samsung group after his father, Lee Kun-hee, died in 2020. Lee had been convicted of bribing former President Park Geun-hye and her confidante in exchange for government support for the 2015 merger, and had served 18 months in prison before he was released on parole in 2021. He was later pardoned by President Yoon Suk Yeol in 2022, ahead of the Lunar New Year holiday, in a move that sparked public criticism and controversy.
The acquittal could also boost Samsung’s business prospects, as Lee could resume his role as the chairman of Samsung Electronics, the world’s largest maker of smartphones, memory chips, and display panels. Lee had been barred from managing the company due to his legal issues, and had delegated his responsibilities to his lieutenants. Lee is widely regarded as the visionary and strategist behind Samsung’s global success, and his return could help the company cope with the challenges and opportunities in the fast-changing and competitive tech industry.
Samsung Electronics reported a record net profit of 49.9 trillion won ($40.6 billion) in 2023, up 23% from a year earlier, thanks to the strong demand for its products amid the pandemic and the recovery of the global economy. The company also announced a massive investment plan of 240 trillion won ($195 billion) over the next three years, aiming to expand its presence in various sectors, such as semiconductors, biopharmaceuticals, artificial intelligence, and 6G.
Samsung Faces Public Scrutiny and Social Pressure over Its Governance and Ethics
Despite the court’s verdict and Samsung’s business performance, the company still faces public scrutiny and social pressure over its governance and ethics, as it has been accused of abusing its market dominance, evading taxes, violating labor rights, and engaging in corrupt practices. The company has also been criticized for its family-run and opaque management structure, which has enabled the Lee family to wield enormous power and wealth over the sprawling Samsung empire, which accounts for about 20% of South Korea’s gross domestic product.
Samsung has pledged to improve its corporate culture and social responsibility, and has vowed to end its decades-long practice of employing external directors to oversee its affiliates, which has been seen as a way of avoiding taxes and transferring wealth among the Lee family members. The company has also promised to donate 1.5 trillion won ($1.2 billion) to various social causes, such as public health, education, and culture, as part of Lee’s apology for his past wrongdoings.
However, some activists and experts have questioned the sincerity and effectiveness of Samsung’s reform efforts, and have called for more transparency and accountability from the company and its leaders. They have also urged the government and the regulators to strengthen the oversight and enforcement of the laws and rules that govern the chaebols, the family-owned conglomerates that dominate the South Korean economy and society.