NATIONAL

Lee Jae-yong’s fate to be decided Friday

By Ock Hyun-ju
  • Published : Aug 23, 2017 - 18:37
  • Updated : Aug 23, 2017 - 18:41
After five months of trial, a Seoul court will determine Friday the fate of Samsung Electronics Vice Chairman Lee Jae-yong.

Lee’s final court session, which will not be televised in accordance with the court’s decision Wednesday, will begin at 2:30 p.m. Judges will deliver the verdict on Lee and four other former or incumbent executives of Samsung and if they are found guilty, will issue a sentence. This is a lower-court trial and either side could appeal.

Competition for the 30 audience seats available for ordinary citizens reached 15:1 and the selection was done by a lucky draw.

Here are a few things to know about Lee’s trial, dubbed the “trial of the century.” 

(Korea Herald DB)

Who is Lee Jae-yong?

The crown prince of Samsung, a towering business conglomerate that generates a fifth of South Korea’s gross domestic product, Lee was raised, educated and trained to one day succeed his father -- Samsung Group Chairman Lee Kun-hee.

Ever since the senior Lee suffered a near-fatal heart attack in 2014, Lee Jae-yong, aka Jay Y. Lee, 49, has been stepping up as a leader, strategist and key decision maker in Samsung, while making moves to complete the transfer of group control -- equity ownership-wise -- to him.

He currently holds the title of Samsung Electronics’ vice chairman and also sits on the firm’s board of directors.

It seemed everything in Lee’s life was served on a silver platter, but since Feb. 17 he has been living in a 6.56 square-meter solitary cell, standing trial for bribery and other criminal charges. 


What are his charges?

Lee faces a total of five charges: bribery, embezzlement, illegal transfer of assets overseas, concealment of criminal proceeds and perjury.

Key to all five is his ties to now-impeached President Park Geun-hye, her close confidante Choi Soon-sil and Choi’s horse-riding daughter Chung Yoo-ra.

Bribery: Lee is accused of paying or promising to pay a total of 43.3 billion won ($38 million) -- 21.3 billion won in sponsorship for Chung’s equestrian training abroad and 22 billion won in donations to three foundations allegedly controlled by Choi. If convicted, Lee could face up to five years in prison.

Embezzlement: The prosecution sees the 29.8 billion won actually paid -- the rest was promised but unpaid -- were corporate money misappropriated by Lee for personal gains. Embezzlement of such an amount carries a prison term of up to 8 years.

Illegal overseas transfer of money: This is the gravest charge that could land Lee in prison for 10 years to a life sentence. The prosecution insists Samsung’s signing of a 21.3 billion won deal with Core Sports, a paper company based in Germany believed to be controlled by Choi, and actually wiring 7.9 billion won to the company were an attempt by Lee to sneak his assets overseas.

Concealment of criminal proceeds: Prosecutors argue another 7.8 billion won paid was in fact used to buy an expensive horse for Chung, which was an attempt to disguise Lee’s bribery and embezzlement as a legitimate sports sponsorship deal. If convicted, Lee could face imprisonment of up to five years.

Perjury: Appearing at a parliamentary hearing last year, Lee maintained his innocence and denied any knowledge of the group’s dubious donations. For this, he is charged with perjury, which carries a jail term of up to 10 years.


What are key clashing points?

It all comes down to one question -- whether Lee Jae-yong was a direct beneficiary of the alleged donations-for-political favors deal with President Park and whether he was a top decision-maker in the process.

Special counsel argues that shady deals were made in three one-on-one meetings between Park and Lee from 2014 to 2016.

Based on that, Lee ordered Samsung units to donate to Choi-controlled entities and support the equestrian sport and Park, in return, pressured the state-funded National Pension Service, the largest stakeholder in Samsung C&T, to vote in favor of the company’s 2015 merger with affiliate Cheil Industries. The merger was highly controversial at that time, seen as aiding Lee only to tighten his grip over Samsung Group, and minority shareholders campaigned to block it, although to no avail.

Former Health Minister Moon Hyung-pyo received 2 1/2 years in prison in June for pressuring the National Pension Service to vote for the merger. But the verdict did not include the bench’s judgement on whether Moon had done so under Park’s order.

Lee’s defense team fought hard to prove the money was not a bribe and the decision to donate was not made by Lee, since bribery is the central core of all the allegations against him. Four Samsung executives standing trial alongside Lee claimed they were the ones behind the donations or the equestrian sponsorship. They said they did so under pressure and out of fear of what the president and Choi could do to their business.


If convicted, what would happen to Samsung?

There are mixed views about the impact Lee’s possible absence from Samsung would have on the conglomerate.

While some say it would be difficult for the group to paint a big picture without Lee, chaebol reformists call it an opportunity to end the long-standing problems of the chaebol model -- the opaque corporate governance and transfer of control within the group’s founding family, often involving illicit means.

Although the de facto chief has been away since February -- detained in a correction facility -- the state of Samsung Electronics has never been better. In the second quarter of this year, the electronics giant was set to become the most profitable company in the world, beating Apple for the first time. The share price of Samsung Electronics has surged 32 percent this year.

Rumors that Lee’s sister Lee Boo-jin might fill in for her brother still seem unlikely, as she has no allies within Samsung Electronics, the group’s flagship and cash cow, and does not have enough power or shares to control the tech giant. Lee Jae-yong holds 0.58 percent, while his sisters holds none. There is general consensus the conglomerate will not give up on Lee as its next leader whatever.


Implications for Park Geun-hye?

The ruling on Lee is expected to serve as a barometer for the fate of ex-President Park and her friend Choi, the two women who plunged South Korea into turmoil last winter with a sweeping corruption scandal which ended with the nation‘s first-ever impeachment of an elected president. Both are now arrested and standing on trial for a raft of charges, but at the core is again, their conspiring to extort donations from local firms including Samsung Group.

Park, who was removed from office in March over the corruption scandal, is trial a total of 18 charges including bribery and abuse of authority.

If Lee is found guilty of giving bribes, the persons who are accused of receiving the money -- Park or Choi -- are also likely to face conviction.

The ruling on Park is expected in October.

By Ock Hyun-ju and Cho Chung-un (laeticia.ock@heraldcorp.com) (christory@heraldcorp.com)