Aug 25, 2017
Samsung's heir apparent guilty of corruption, sentenced to five years in prison
TOKYO — Lee Jae-yong, the scion of the Samsung dynasty and the most powerful tycoon in South Korea, was found guilty Friday for his part in a sensational corruption scandal that had already brought down a president.
Lee, who is 49 and had been in detention since February, was sentenced to five years in prison — far less than the 12 years special prosecutors had asked for, but still an astounding turn of events even after the turmoil of the last year.
The country is no stranger to political corruption scandals, but this one has riveted South Koreans who, increasingly, are demanding accountability from political and business leaders, regardless of the impact it might have on the national economy. The conglomerate is so powerful in South Korea that the country is sometimes called "The Republic of Samsung."
Lee was found guilty on all five charges: bribery, embezzlement, illegally transferring assets overseas, concealing criminal proceeds and perjury. All the charges related to "Choi-gate," the corruption scandal that led to the impeachment of Park Geun-hye as president in March.
"At the heart of this case is the collusion between political power and economic power," the presiding judge, Lee Jin-dong, said. "This is a case in which Samsung executives ... provided a large amount of money in bribes to the president, who has the final say in economic policy, in anticipation of help with the succession process," the judge said, according to reporters in the courtroom.
Lee showed no expression when the verdict and sentence was read out, according to those present in the courtroom.
Samsung declined to comment, instead referring to a statement from Lee's lead lawyer, who said he would appeal immediately. "I cannot possibly accept any part of the lower court's guilty verdicts, in terms of interpretation of law and finding of facts," Song Wu-cheol said in the statement.
The verdict could have implications for the other cases still in process — including the impeached president.
Park, for her part, is now on trial for 18 charges including bribery and extortion in relation to some $50 million she and her confidante, Choi Soon-sil, are alleged to have taken or solicited from three big conglomerates, including Samsung, in return for business favors. If convicted, Park could face a prison term of 10 years to a life sentence.
Samsung had been accused of paying or promising to pay a total of $38 million to Choi in return for government support for a merger of two units of the conglomerate. The merger, which was approved, helped Lee tighten his grip on the Samsung group, which his family controls with a tiny fraction of the shares through a complex web of cross-shareholdings.
During five months of hearings that had been dubbed the "trial of the century," a special prosecutor laid out his case against Lee, alleging that the Samsung heir arranged the deal during three face-to-face meetings with Park between 2014 and 2016.
Four other former or incumbent Samsung executives were also on trial relating to the same deal. Two of them were sentenced to four years behind bars, while the other two were given suspended terms.
Lee, who was represented by a team of 28 lawyers, had maintained his innocence throughout the trial. His defense attorneys have said that he was a hands-off manager who had no knowledge of the arrangement, which they said was organized by his subordinates.
But in its ruling Friday, the Seoul Central District Court found Lee and four former Samsung executives guilty of paying bribes totaling $6.4 million, including paying for equestrian training for the daughter of Choi, the former president's confidante.
While denying being involved in any bribery scheme, Lee had admitted during a parliamentary hearing in December that Samsung had given a $900,000 horse to Choi's daughter, an Olympic equestrian hopeful.
The three-judge bench also found Friday that Lee had embezzled corporate money for personal gain in using Samsung funds to ensure that a merger that would cement his grip on the conglomerate was approved, then lied about it.
The $8 billion merger at the center of the scandal was between Samsung C&T Corporation, a unit that owns a controlling stake in Samsung Electronics, and Cheil Industries, another Samsung business. Lee needed the support of the government-run National Pension Service, a major Samsung shareholder, for the deal to go through.
Prosecutors allege that Lee offered to pay the bribes to Choi — ostensibly as donations to two foundations she ran — and in return, the president's confidante would put pressure on the pension service to back the merger.
The head of the pension service, a former health minister, was in June found guilty of abusing his power by supporting the merger and sentenced to 2-1/2 years in prison.
The trial has come during a rocky period of Samsung, which literally means "Three Stars."
It was founded by Lee's grandfather some 80 years ago as an exporter of fruit and dried fish but was transformed — as part of South Korea's government-backed industrialization that began in the 1960s — into a diverse conglomerate that now comprises 60 different business units.
Under Lee Kun-hee, Samsung became known as a high-tech giant, famous for its phones and televisions.
But Lee Kun-hee suddenly had a heart attack in early 2014 and has been in a coma ever since. Lee Jae-yong, who had been heir apparent, has been running the company for the last 3-1/2 years, although he is officially still vice chairman while his father is alive.
Samsung has been in a state of limbo between generations. Then last year, Samsung Electronics, the conglomerate's flagship company, endured a product disaster, having to recall its Galaxy Note 7 smartphone after it developed a habit of combusting.
But the company has rebounded, recording net profits of almost $10 billion in the second quarter of this year. Its share price has surged by 32 percent so far this year.
On Wednesday, the company unveiled the successor to the disastrous Galaxy Note 7 — the Galaxy Note 8. The latest addition to Samsung's premium phone line will show whether the company has the ability to overcome its past and secure its future, analysts said.
This is not the first time that a Samsung "owner" has been sentenced to prison, but it's the first time one has served time.
Lee's father was convicted of embezzling corporate money and evading tens of millions of dollars in taxes in 2009, receiving a suspended three-year sentence. But he never spent a day in prison and was pardoned by the president later that year.
Lee Jae-yong will, however, serve time as sentences of more than three years cannot be suspended under South Korean law.
Furthermore, Moon Jae-in, the liberal who was elected president in May after Park's impeachment, has taken a strong stance against corporate overreach and on the campaign trail vowed to clamp down on the use of presidential pardons to exonerate business chiefs.
Lee Kun-hee had been grooming his son for years to be his successor, leading to him being dubbed locally the "crown prince of Samsung."
Jay Y. Lee, as the son likes to be known in the west, speaks fluent English and Japanese. He has an MBA from the prestigious Keio University in Tokyo and spent several years pursuing a doctorate at Harvard Business School, although he did not graduate.
He was elevated to vice chairman in 2012, taking over the running of the conglomerate when his father was incapacitated two years later.
The Washington Post
by Anna Fifield