Heir to South Korea’s Samsung faces day of reckoning after four years of graft trial

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FILE PHOTO: Samsung Group heir Jay Y. Lee arrives for a court hearing to review a detention warrant request against him at the Seoul Central District Court in Seoul

By Joyce Lee

SEOUL (Reuters) – A South Korean court will sentence Samsung Electronics Co Ltd heir Jay Y. Lee on a bribery charge on Monday, a ruling likely to have ramifications not just for his company but for all of South Korea’s chaebol conglomerates.

Lee, 52, was convicted of bribing an associate of former President Park Geun-hye and jailed for five years in 2017. He denied wrongdoing, the sentence was reduced and suspended on appeal, and he was released after serving a year.

The Supreme Court then sent the case back to the Seoul High Court, which will rule on it, and the sentencing, on Monday. Prosecutors have called for a nine-year jail term.

Legal experts say the court is highly unlikely to acquit Lee but it could suspend his sentence, allowing him to remain free. Lee is involved in a separate trial for accounting fraud and stock manipulation.

For many South Koreans, it is not just Lee who will be in the dock on Monday but the whole chaebol system of family-run conglomerates, long credited with building Asia’s fourth-largest economy but criticised for wielding too much power and lapses in governance and compliance.

President Moon Jae-in was elected in 2017 on a reformist platform vowing to clean up chaebol practices but he has since encouraged the big businesses to create jobs, especially as the novel coronavirus undermined growth.

Similarly, public sentiment seems to have swung back in favour of the chaebol and many South Koreans would like to see a decisive Lee at the helm of the Samsung empire as it navigates intensifying global competition and pressure to innovate.

“Any absence could affect Samsung from taking on major deals to jump ahead of the competition in fields it is trying to expand in, perhaps buying a struggling competitor in contract chip manufacturing, for example,” said Lee Jae-yun, an analyst at Yuanta Securities Korea.

‘MITIGATING FACTOR’

On the broader question of chaebols, Cho Chang-hoon, professor at Hallym University of Graduate Studies, said while the conglomerates benefit from centralised decision-making they are often open to attack, including from investors, on environmental, social and governance issues.

Lee has pledged to change Samsung and make compliance and social responsibility top priorities, in part by ensuring that an independent compliance panel set up last year continues to operate.

The judges who will rule on Monday have said they will take the issue of compliance into account in making their decision.

“This is the first trial that proposed compliance as a mitigating factor in sentencing and it could lead to it being utilised in South Korea’s charisma-led chaebol culture as a way to build consensus with external stakeholders,” Cho said.

Lee’s father, Lee Kun-hee, who died in October, was convicted of bribery in 1996 and tax evasion in 2008 but never served time in jail and eventually got a presidential pardon, leniency that was typically shown to business leaders.

But such treatment can no longer taken for granted. The leader of the third-largest conglomerate, SK, served more than two years in prison for embezzlement in 2013-2015.

A petition signed by 57,440 members of the public and lodged with the presidential office hailed Samsung as “the pride of South Korea” and called for Lee to remain free and run the company that pays so much in taxes and provides so many jobs.

(Reporting by Joyce Lee; Editing by Jack Kim, Robert Birsel)

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