Samsung leader appears in court, awaits decision on whether he'll be jailed again

The de facto leader of Samsung Group, Jay Y. Lee, appeared before a South Korean court on Monday, awaiting a ruling on whether new allegations including accounting fraud and stock manipulation will send him back to jail after more than two years of freedom.

Prosecutors on Thursday asked the court to issue an arrest warrant against Lee, culminating a probe into a controversial 2015 merger of two Samsung affiliates that they said helped facilitate Lee’s plan to assume greater control of the group.

The risk of more jail time for Lee who has led the group since his father’s heart attack in 2014, has cast a pall over the sprawling conglomerate and its crown jewel, Samsung Electronics Co, whose annual revenue alone is equivalent to 12 per cent of South Korea’s gross domestic product.

Lee, 51, wearing a face mask and a dark suit, appeared at the Seoul court for a hearing that began at 10:30 a.m. He did not answer questions from reporters before entering the court.

After the hearing, he is expected to head to a detention centre to await the judge’s decision, expected on Monday or early Tuesday.

Prosecutors have accused Lee of being involved in illegal transactions and stock manipulation that furthered the 2015 merger of Samsung C&T and Cheil Industries. They also allege he had a role in inflating the value of Samsung Biologics Co Ltd, which counted Cheil Industries as a major shareholder.

The merger of the two affiliates was seen as key to Lee increasing control of the sprawling group but came under fire by critics who said it rode roughshod over the interests of minority investors.

Samsung on Friday denied the allegation of stock-manipulation against Lee, saying it was “beyond common sense” to claim Lee was involved in the decision-making.

In a further statement over the weekend, the group said the lengthy probe is weighing on management, which is in “crisis” at a time when the coronavirus pandemic and U.S.-China trade disputes are adding to uncertainty.

The company declined to make Lee available for comment.

“If he is arrested, this will further hurt the reputation of Lee and Samsung. There will more questions about his legitimacy as the CEO and successor of the company,” said Chang Sea-jin, business professor at Korea Advanced Institute of Science and Technology.

Lee was jailed for about one year until Feb. 2018 for his role in a bribery scandal in which he was accused of giving horses as gifts to the daughter of a confidante of former President Park Geun-hye to win government support for the merger of the two affiliates.

South Korea’s Supreme Court has since overturned a lower court decision to suspend his sentence. It is unclear when there will be a new court ruling over whether he will have to serve further jail time for that conviction.

In South Korea, economic power is highly concentrated in several chaebol or conglomerates, most of which have run into controversy over succession problems. At Samsung, prior to his father’s heart attack, Jay Y. Lee had only small stakes in several affiliates that raised the possibility he could lose control of the group to other shareholders.