Samsung’s de facto leader Lee Jae-yong has been arrested for bribery, embezzlement and perjury in connection with the country’s corruption scandal in a big setback for South Korea’s largest conglomerate that could hinder its succession and restructuring plans.
Mr Lee, the 48-year-old vice-chairman of Samsung Electronics, is the highest-profile business figure engulfed by the influence-peddling scandal that is poised to topple President Park Geun-hye.
The jailing early on Friday of Samsung’s chief — the first such arrest in its 79-year history — could lead to a leadership vacuum at the group and hamper restructuring plans as the third generation of the founding family prepares to take the reins. It could also affect strategic decisions on forthcoming investments and acquisitions.
The arrest also comes as Samsung Electronics, the group’s crown jewel, is scrambling to revive the fortunes of its mobile business following the costly debacle over the Galaxy Note 7 smartphone last year.
Friday’s 5.30am ruling came more than 10 hours after the end of a lengthy court hearing on whether to issue an arrest warrant. The judge rejected prosecutors’ request to arrest Park Sang-jin, the president of Samsung Electronics who was involved in arranging Samsung’s financial support for Ms Park’s shadowy “shaman adviser”, saying he simply followed Mr Lee’s order.
Prosecutors have up to 10 days to determine whether to indict Mr Lee before they wrap up their investigation at the end of this month. He is being held in a single-person cell at the Seoul Detention Center.
Samsung said no decision had been made on whether it would contest his arrest or seek bail. If Mr Lee is indicted, a court ruling should be made within three months.
Han Jung-seok, a judge at the Seoul Central District Court, said Mr Lee’s arrest was warranted, given new alleged crimes revealed by a special prosecutor and additional evidence to support the case. The country’s independent counsel investigating the graft scandal involving Ms Park and her shadowy adviser has accused Mr Lee of bribing them with about Won43bn to seek favours to smooth his succession and consolidate control over key group units.
Mr Lee has been leading the Samsung Group, which has about 60 business units, since his father and chairman Lee Kun-hee was hospitalised with a heart attack in 2014.
The special prosecutor has also accused him of hiding assets overseas and concealing profits made from illicit business activities. He has also been accused of lying under oath during a parliamentary hearing about his role in the influence-peddling scandal that led to parliamentary impeachment of Ms Park last December.
Mr Lee has admitted making political donations but denied that they were aimed at getting any business favours in return. His arrest came after he was interrogated by the special prosecutor’s team for more than 15 hours on Monday. He could spend months in jail awaiting trial.
“We will do our best to ensure that the truth is revealed in future court proceedings,” Samsung said in a statement.
Mr Lee’s arrest was welcomed by opposition political leaders. “We hope that Mr Lee’s arrest will make Samsung break with its wrongful past and reinvent itself. Furthermore, we hope that this will be a signal for our society to end its deep-rooted bad practices of collusive links between government and businesses and become a fair country,” said a spokesman for Moon Jae-in, a frontrunner in the presidential race to replace Ms Park.
Mr Lee is widely expected to take control of the Samsung Group, which permeates almost every aspect of South Korean life and accounts for about 20 per cent of the country’s economy. In October, he took a seat on the board of Samsung Electronics, the world’s largest maker of memory chips, display panels and smartphones, to formalise his position after having effective control over the company for years.
The elder Lee was twice convicted of financial crimes during his time leading the sprawling conglomerate but was never imprisoned. On both occasions, the sentences were suspended and his record subsequently expunged by presidential decree.
The special prosecutor has less than two weeks left before wrapping up his investigation into the scandal involving Ms Park unless the investigation period is extended by Prime Minister Hwang Kyo-ahn. Ms Park remains in office though stripped of her powers while the constitutional court deliberates her impeachment by parliament.
(Published by Financial Times - February 17, 2017)