Samsung Electronics Chairman Jay Y. Lee was recently acquitted of charges related to accounting fraud and stock manipulation by a Seoul court. Released on Monday, February 5, the unexpected verdict came contrary to the expectations of legal analysts who had anticipated a suspended sentence.
The ruling may grant Lee more flexibility in steering the affairs of South Korea’s largest conglomerate.
Details of the 2015 Merger Case and Latest Ruling
In 2015, Lee Jae-Yong., and 13 other former Samsung executives allegedly pushed through the merger of two affiliates—Samsung C&T and Cheil Industries— without consulting the shareholders.
Before the merger, Cheil was under the Lee family and other related entities, not Samsung C&T, a prominent Samsung Electronics stakeholder (Samsung’s flagship unit).
In the lawsuit, filed in the Seoul District Court, prosecutors demanded a five-year jail term, while Lee pleaded not guilty to the charges. The Samsung chief argued that he and the concerned executives engineered the merger, believing it would benefit the shareholders.
After their review, the three judges presiding over the case said the two companies’ boards agreed to push through with the merger.
One of the judges, Park Jeong-je, told the court that there was no basis to conclude that Lee Jae-yong engineered the merger to strengthen his management rights or aid his succession within Samsung.
In the end, the court acquitted all 14 defendants in the case. This ruling will ensure that Lee, who was convicted and slammed a 30-month jail sentence for bribery in 2017, does not return to jail after serving 18 months.
In a related case, the Permanent Court of Arbitration (PCA) tribunal ordered the South Korean government to pay U.S. hedge fund Elliott $108.5 million for the National Pension Service’s approval of the 2015 $8 billion merger.
Implications of Lee Jae-Yong’s Acquittal on Samsung
Commenting on the development, Kim Ki-chan, a business professor at the Catholic University of Korea, said the legal issues had hindered Samsung’s innovation and job creation for nearly a decade.
Lee’s legal problems had contributed to an administrative and risk-averse culture at Samsung Electronics.
The latest verdict prevents Lee from returning to jail and marks the resolution of legal issues dating back to 2016. Lee’s lawyer, Kim You-jin, expressed gratitude for the court’s “wise decision.”
While the ruling represents a win for Samsung, it faced criticism from Park Yong-jin, a lawmaker for the main opposition Democratic Party, who deemed Lee’s succession unfair.
Park Yong-jin argued against protecting conglomerate heads in the interest of a fair market economy. Notably, big South Korean firms such as Samsung are still under the control of their founding families, who are responsible for most of the nation’s economic success.
The Lee family and related partners possessed a 20.7% stake in Samsung Electronics as of September 2023. Meanwhile, following the latest court ruling, Samsung C&T stock rose by 5% before leveling off.
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Damien Fisher
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