Fourteen senior Samsung management including Chairman Lee Jae-yong, will find out today whether they are going to prison with several executives set to front a Seoul district court for a ruling on charges that they rigged company valuations.
The accounting fraud charges involve the controversial 2015 merger of two Samsung affiliates, Cheil Industries and Samsung C&T Corp were first aired three years ago when South Korean prosecutors took action against the Samsung management team.
According to the South Korean Herald, the verdict hearing, which was originally set to take place on Jan. 26, however was pushed back after both Lee and the prosecution submitted additional materials, including written opinions after the final hearing which was held on Nov. 17, 2023.
In the November trial, the prosecution demanded a prison term of five years and a fine of 500 million won ($373,000) for Lee.
The prosecution argues that Lee and the company executives planned and executed a series of illegal steps in the process of merging Samsung Group’s construction and fashion companies. The prosecutors allege the illegal processes allowed Lee to increase his control over the conglomerate.
Lee denies all charges, saying his decisions at the time were made to enhance the competitiveness of the two companies.
The court case comes at a bad time for Samsung management for faced a tough 2023.
Samsung Electronics on posted a 34.57% drop in operating profit in the fourth quarter from a year ago, in line with its guidance issued last month.
Revenue: 67.78 trillion Korean won (about $51 billion), vs. 69.27 trillion Korean won expected by LSEG analysts.
Operating profit: 2.82 trillion Korean won, vs. 3.43 trillion Korean won expected by LSEG analyst
“My goal was to keep the company surviving and growing while earning support from the employees, stakeholders and the people. The merger of the two companies was part of the effort towards that goal,” Lee said in testimony during the final hearing in November last year.
“I have never prioritized my personal interests in the process of the merger, and I swear I also have never imagined I would increase my shares and hurt other shareholders.”
The years long court disputes also appear to have taken a toll on Samsung’s business management.
As the court trails have proceeded, Samsung has carried out small and mid-sized mergers. But the company has continued to fail to keep its promise of signing big deals since it acquired Harman for 9 trillion won in 2017.
Samsung has also given way to its archrival Apple regarding smartphone shipment volume in 2023 for the first time in 13 years of being the world’s largest smartphone maker.
