Samsung chair Lee Jae-yong, the grandson of founder Lee Byung-chul, is facing potential new charges of stock manipulation and accounting fraud linked to the 2015 merger of two of the group’s units, leading South Korean prosecutors to pursue a five-year jail term for the company’s heir.
When he was vice-chair of Samsung Electronics in 2015 and during the merger, Jae-yong allegedly exaggerated the stock value of Cheil Industries, a textile company, and diminished the cost for Samsung C&T, a construction and engineering business according to Korean investigators.
The prosecutors say he did so, to ensure the billionaire family’s continued ownership over the empire but, in doing so, caused losses for shareholders of Samsung C&T with his stock manipulation.
They also claim accounting fraud of $5.9 billion occurred of the group’s biopharmaceutical unit around the same time and organised by Jae-young.
“The defendants undermined the foundation of the country’s capital markets to smooth the leader’s succession,” the prosecutors asserted.
“They abused the authority granted by the company and shareholders for the private interests of the group leader and abused extreme imbalance of information.”
Jae-yong denies any illicit actions and that all he has ever done have been part of the organisation’s standard business activities.
This is not the first time he has come under scrutiny. In 2017, the magnate was found guilty of paying off then-South Korean president Park Geun-hye in an independent case connected to the merger.
After 18 months in prison, Park’s left-wing replacement, Moon Jae-in, granted his parole approval.
Lee Jae-yong, vice chairman of Samsung Electronics
Additionally, Yoon Suk Yeol, the prosecutor administering Lee and Park’s convictions, has subsequently been named the country’s president.
Commentators say the Yoon administration has been too sympathetic to the nation’s powerful family-run conglomerates.
Only last year, Suk Yeol let Jae-yong off the hook, saying the wealthy heir could be reinstated as head of the nation’s biggest enterprise to assist and support the “revitalisation of the economy”.
“Accounting fraud and stock manipulation are serious crimes that shake the foundation of capitalism, but they are seeking too light a punishment for Lee,” said Park Sangin, an economics professor at Seoul National University.
“Under President Yoon, the government’s chaebol reform and punishment of tycoons accused of white-collar crimes are going backward, which is very worrisome.”
The $12.2 billion joining of Samsung C&T and Cheil uncovered the too-friendly association between the corporations and the government.
South Korea’s National Pension Service (NPS), which held an 11% stake in Samsung C&T, supported the merger despite the U.S. hedge fund Elliott Management’s resistance, which was a minority shareholder of Samsung C&T.
Elliott won $165.8 million in arbitration this year for the merger’s damages and the government’s interference, but South Korea is appealing the ruling.
As of today, Samsung Electronics has not responded or commented on this matter.
