Lee Jae-yong acquitted by appellate court; Samsung needs fresh growth momentum
Samsung Electronics Chairman Lee Jae-yong was cleared Monday of all charges linked to the controversial merger of two Samsung affiliates in 2015, paving the way for him to fully focus on the management of South Korea’s embattled tech giant.
The Seoul High Court upheld the lower court’s verdict dismissing all charges against Lee, including stock manipulation, breach of trust, accounting fraud and other irregularities related to the merger between Cheil Industries and Samsung C&T. The judges also acquitted 13 other Samsung officials related to the case.
The high-profile merger of Cheil Industries and Samsung C&T was seen as a pivotal development that ensured Lee’s succession as heir of the family-controlled conglomerate. Investigators sought to prove the alleged irregularities and Lee’s involvement in the succession process, indicting Lee and Samsung executives over the 2015 merger in 2020.
But a lower court acquitted Lee of all 19 charges in February last year.
Despite the prosecution’s all-out efforts -- introducing more than 2,000 pieces of new evidence -- the judges in both the first and second trials reached the same conclusion: No legal violations had occurred, nor had shareholders suffered any losses.
Prosecutors contended that Lee and the now-defunct Future Strategy Office pushed ahead with the merger despite knowing it would disadvantage Samsung C&T and minority shareholders. However, the judges found no evidence of misinformation, concealment of material facts or fraudulent disclosures.
The appeals court also rejected charges of Lee’s involvement in accounting fraud and false corporate disclosures at Samsung Biologics, a subsidiary of Cheil Industries. Prosecutors contended that Lee was involved in fraudulent accounting practices aimed at boosting Cheil’s value ahead of the merger. In August, the Seoul Administrative Court put out a separate verdict that ruled Samsung Biologics altered accounting standards.
But the judges determined there was no evidence of deliberate intent to mislead, dismissing the prosecution’s argument.
There is still a chance that prosecutors may bring the case to the Supreme Court, but the latest not-guilty verdict at the appeals court is widely interpreted as a clear signal that the extended legal risks haunting Lee and Samsung have been resolved.
Lee has been mired in legal troubles for years. Samsung’s global reputation suffered significantly as Lee was sentenced to 18 months in prison from 2017 for bribing former President Park Geun-hye and her close confidante to gain government support for the controversial merger deal. In 2021, President Moon Jae-in pardoned Lee, but legal uncertainties continued to put pressure on him.
Some observers believe that the prolonged legal risks involving the conglomerate’s leadership have resulted in the erosion of Samsung’s global competitiveness. Last year, for instance, Samsung's chip business ended up with smaller operating profit compared with its smaller local rival SK hynix.
In contrast to the decisive and bold corporate decisions made by former chairman Lee Kun-hee, Samsung has maintained a conservative stance under the leadership of the younger Lee in seeking mergers and securing new growth engines.
Samsung had pioneered innovation in various fields from chips to smartphones, but it is now under criticism for sticking to outdated or not-so-impressive practices that continue to disappoint investors both at home and abroad.
Failing to catch up with the fast-evolving AI industry, Samsung is lagging behind competitors in the high bandwidth memory chip sector, which has become crucial for AI development.
Samsung used to focus on rich features and creative solutions in developing high-powered Galaxy smartphones, but the company is increasingly focused on cutting costs in the rollout of its Galaxy models. For instance, it has removed the Bluetooth function of S-Pen for the latest Galaxy S25 Ultra, sparking complaints from users. Last year, the company downgraded Galaxy’s much-ballyhooed camera zoom in an apparent attempt to reduce costs.
The court decision Monday has set the stage for Lee to steer Samsung toward a new path in the intensifying global competition, but it remains to be seen whether Samsung can pull out of its extended complacency.
