Samsung Leader Indicted In a Second Financial Case -- WSJ
September 02 2020 - 3:02AM
Dow Jones News
By Elizabeth Koh
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 2, 2020).
South Korean prosecutors on Tuesday indicted Samsung's de facto
leader Lee Jae-yong on charges alleging he manipulated stock prices
and violated the country's capital-markets laws, raising the
possibility that the business tycoon could return to prison.
The 52-year-old Mr. Lee, who was named along with 10 current and
former Samsung executives in the prosecution's case, won't be
arrested as part of the indictment. But he will have to stand trial
in a Seoul district court. A trial date hasn't yet been set.
Mr. Lee, a grandson of Samsung's founder, is already on trial
for a separate -- though related -- case over a 2017 bribery
conviction that is in an appeals court and earlier landed him in
prison.
The prosecutors' Tuesday indictment will likely unfold in courts
over multiple years and the prospects of the case heading to the
country's Supreme Court are particularly high, legal experts say.
Major violations of South Korea's capital-markets laws call for
sizable fines and can result in prison sentences of several years,
those experts say.
Mr. Lee was also charged with breach of trust and violating
auditing laws.
A Samsung spokesman declined to comment on the case. After
Tuesday's indictment, lawyers for Mr. Lee accused investigators of
targeting him and said in a statement that "there is nothing new
worth refuting."
"The prosecution, which is against the will of the people and
disregards the reasonable judgment of the judiciary, is not only
against the legal balance but also undermines the public's trust in
the prosecution," the statement said.
The case brought Tuesday revolves around the 2015 merger of two
Samsung affiliates -- Cheil Industries Inc. and Samsung C&T
Corp., which prosecutors have said strengthened Mr. Lee's control
over parts of the family-led empire. Investigators had focused on
perceived irregularities in Cheil's ownership stake in Samsung
Biologics Co. before the deal went through.
In 2018, South Korea's Financial Services Commission said
Samsung Biologics deliberately breached accounting rules in a move
that encouraged the merger by inflating Cheil's financials and
referred the matter to prosecutors. Prosecutors have alleged Mr.
Lee was involved in orchestrating accounting malpractice. Samsung
has rejected any allegations of wrongdoing.
Over the past several months, prosecutors conducted more than 50
search-and-seizure requests and summoned more than 400 Samsung
employees and executives for questioning. They also attempted to
arrest Mr. Lee in June, though a district court blocked that
move.
The decision to press forward with an indictment was an unusual
move by South Korean prosecutors after a panel, made up of outside
experts on legal and other matters, recommended the case focused on
the merger be dropped in June. The panel, formed in 2018 to review
high-profile cases, was convened at Mr. Lee's request to weigh in
on the legitimacy of the probe. It was the first time that
prosecutors ignored the panel's guidance, though it has no binding
power.
Samsung sought several times to neutralize its legal challenges,
heeding a judge's recommendation in the separate bribery case to
create a compliance committee and apologize to the public. In an
apology earlier this year, Mr. Lee vowed he wouldn't pass control
of the company to his children and that the company would remedy
other shortcomings, such as discouraging unions.
Mr. Lee is formally the vice chairman of Samsung, though he has
run the conglomerate since his father, Samsung Chairman Lee
Kun-hee, became incapacitated after a heart attack in 2014. All key
decisions and investments require a signoff from the younger Mr.
Lee, who goes by "Jay Y." in the West.
Mr. Lee has spent nearly the past four years mired in political
and legal scandals, largely tied to the 2015 merger that
consolidated his ownership stake and tightened his grip on the
conglomerate.
Mr. Lee was first indicted in 2017 on charges of bribery,
embezzlement and perjury, when prosecutors asserted that the
company had paid a friend of South Korea's then-President Park
Geun-hye to secure government support for a merger between the two
Samsung affiliates. South Korea's national pension fund cast a
decisive vote in support of the merger.
Mr. Lee has denied the charges. He was sentenced to five years
in prison and spent a year behind bars in 2017 and 2018. His
sentence was later suspended and he was freed from prison. Then
last year, South Korea's Supreme Court overturned the lower court's
decision and remanded the case for retrial.
Write to Elizabeth Koh at Elizabeth.Koh@wsj.com
(END) Dow Jones Newswires
September 02, 2020 02:47 ET (06:47 GMT)
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