The Korea Herald


Court clears Samsung chief of all charges

By Jo He-rim

Published : Feb. 5, 2024 - 18:32

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Samsung Electronics Chairman Lee Jae-yong leaves Seoul Central District Court on Monday after being acquitted of all charges related to a 2015 merger fraud case, in Seoul on Monday. (Yonhap) Samsung Electronics Chairman Lee Jae-yong leaves Seoul Central District Court on Monday after being acquitted of all charges related to a 2015 merger fraud case, in Seoul on Monday. (Yonhap)

A Seoul court acquitted Samsung Electronics Chairman Lee Jae-yong of all charges related to a 2015 merger fraud case on Monday, clearing the path for the country's biggest tech giant to push forward with investment for future technologies.

In the final verdict handed down at 2:55 p.m., judges at the Seoul Central District Court found Lee and 13 other defendants -- former executives of Samsung -- all not guilty.

The court dismissed the allegations proposed by prosecutors, who claimed that Lee and the Samsung executives rigged the company valuation and cooked accounting books in the merger of two Samsung affiliates, Cheil Industries and Samsung C&T Corp., for the Samsung chief to reinforce his control over the business empire.

"It is difficult to see the merger of the two companies was solely for the purpose of Lee's succession of management rights or for strengthening his power," the judge said during the verdict hearing, which started at 2 p.m.

"There was no evidence to suggest that it was unfair overall or caused damage to shareholders."

The final ruling comes three years and five months since prosecutors brought the case to the court in September 2020. The prosecutors called the merger "predatory" and designed solely for Lee's benefit, hurting the interest of minority shareholders in the process.

For Lee, the prosecution sought a prison term of five years and a fine of 500 million won ($375,000).

Lee denied all charges, saying his decisions at the time were made to enhance the competitiveness of the two companies, and for the benefit of the shareholders.

The court said the "Project G" document, which prosecutors found during the investigation and described as a "predatory succession plan" mapped out by Samsung's corporate strategy office, could not be seen as a succession scheme and that there was no evidence to prove the claim.

"It is true that the Future Strategy Office led the merger. But it is found that the office had a list of other plans that have not been carried out," the judge said, explaining that the merger appears to be a part of normal business operations.

"It is also hard to accept the prosecutors' claim that the office strategically chose a bad time for the merger to create the greatest damages for shareholders. The office appears to have postponed making a decision on the timing several times, and also reviewed plans that can create conflict of interest."

The Future Strategy Office was the de facto control tower of Samsung Group. It disbanded in 2017 after it was alleged to have orchestrated many unlawful actions, including the merger.

The court also found that Samsung C&T had tried many ways to overcome its poor performance and break stagnation in growth, and that it appears to have proceeded with the merger "upon in-depth review."

Not until the verdict was issued did Lee allow a smile. Throughout the hearing, which lasted for about an hour, Lee stayed seated without much movement, except to carefully take a sip of water.

Immediately after the court decision was announced, Lee's legal representative expressed gratitude.

"I believe the verdict clearly confirms the legality of the Samsung C&T merger and Samsung Biologics' accounting treatment. I would like to express my sincere gratitude to the court for its wise judgment," said Kim You-jin, senior attorney at Kim & Chang. Kim did not speak further about a response to the prosecutors' possible appeal.

As the court ruling clears the legal dispute for Lee for now, eyes are on whether he will take more overseas trips to forge big deals with global partners. Since the case was brought to the court, there have been 106 hearings, and Lee attended 95 of them, missing only in exceptional cases, including when he was on a presidential trip.

Samsung now stands at a critical juncture where it has to break away from its poor performance and push forward for growth. In the wake of a severe downturn in the global semiconductors industry, Samsung logged its worst annual operating profit in 2023, posting less than 10 trillion won for the first time since 2008.

Samsung's leadership has also promised to announce its biggest mergers and acquisitions ever year, but failed to keep the promise. The last big deal was made in 2017, when Samsung acquired Harman for 9 trillion won in 2017.

At Monday's closing bell, Samsung Electronics' stock price went down by 1.2 percent to post 74,900 won.