Photo source: FMT
South Korean prosecutors have requested a five-year prison term along with a fine of 500 million KRW (approximately NZD$610,084) for Jay Y. Lee, the Chief of Samsung Electronics, during an appeals court session on Monday.
The appeal follows a previous ruling from ten months ago, where Lee and 13 former Samsung executives were acquitted of charges related to stock price manipulation and accounting fraud tied to the 2015 merger of Samsung subsidiaries, a move that bolstered Lee’s control over the conglomerate.
A verdict in this appeals case is anticipated to be announced between January and February 2025, as reported by local media.
The hearing holds considerable importance for two primary reasons. Firstly, it occurs during a challenging phase for Samsung, which is the leading manufacturer of memory chips, as the company faces declining profits. Secondly, it reflects South Korea’s gradual efforts to reform corporate structures, which could have far-reaching implications for the global consumer electronics sector and for competition within Korea’s tech industry, including its startups.
“The defendant damaged the capital market’s foundation for the group’s succession… The ruling in this case will serve as a reference point for restructuring chaebol companies, [which is a large, family-controlled business conglomerate in South Korea], and accounting in the future,” the prosecutors stated.
They further warned that if leniency is granted to the defendants, it would allow mergers to be conducted in ways that prioritise their interests through unlawful and expedient means without hesitation.
Legal Challenges
Lee has been under scrutiny from South Korean prosecutors for several years. In November of the previous year, they sought a five-year prison sentence and the same fine over allegations of violating the Capital Market Act concerning an $8 billion merger of Samsung affiliates in 2015. They argued that this merger facilitated Lee’s acquisition of control over Samsung Electronics.
During the November 2023 hearing, Lee denied any wrongdoing and claimed that the merger process adhered to standard operational procedures within the company.
In September 2020, Lee—who was then serving as vice-chair of Samsung Electronics—along with other former executives, faced indictment for their roles in orchestrating the merger between Cheil Industries (Samsung’s textile affiliate) and Samsung C&T (its construction unit) in order to consolidate management control over the tech giant in 2015.
Additionally, they were accused of inflating stock prices for Cheil and Samsung C&T and engaging in fraudulent accounting practices at Samsung Biologics, where Cheil held a significant stake. Prosecutors contended that Samsung had devised a strategy to merge that enabled Lee to strengthen his control and secure management rights.