South Korea court jails Samsung scion Jay Lee for five years

The heir to the Samsung business empire, which includes the world’s biggest smartphone maker, was sentenced today to five years in prison for bribery and other offences in connection with the scandal that brought down South Korean president Park Geun-Hye.

Lee Jae-Yong’s penalty could leave the giant firm rudderless for years and hamper its ability to make key investment decisions. The vice-chairman of Samsung Electronics, 49, arrived at Seoul Central District Court on a justice ministry bus handcuffed, bound with white rope around his dark jacket, and carrying an envelope of documents.

Lee was found guilty of bribery, embezzlement, perjury and other charges centred on payments and promises by Samsung totalling 43.3 billion won (around USD 40 million) to Park’s secret confidante Choi Soon-Sil. The court found the money was in return for policy favours including government support for Lee’s hereditary succession at the group, after his father was left bedridden by a heart attack in 2014.

The defence had denied the charges, saying Samsung was pressured by Park to make the donations under duress — and that Lee was not aware of them and did not approve them. Four other top Samsung executives were also convicted and received sentences of up to four years.

Lee’s lawyers said he would appeal.

The demonstrators who mounted giant candlelit protests against Park last year also targeted Lee and other chiefs of the chaebols, as the family-controlled conglomerates that dominate Asia’s fourth-largest economy are known.

South Korea’s GDP is still growing but social and economic frustrations have mounted over the benefits not being equally shared. Around 800 riot police were deployed around the court to prevent possible clashes between rival sets of demonstrators, Yonhap said.

It was deluged with hundreds of applications for the 30 seats in courtroom 417 available to members of the public, which were allocated by lottery.

Park’s own trial began in the same room in May, and it also saw Lee’s father Lee Kun-Hee convicted of tax and other offences in 2008, receiving a suspended sentence.

The verdict could add impetus to new President Moon Jae-In’s campaign pledges to reform the chaebols.

The firms have long had murky connections with political authorities in South Korea, and past trials of their leaders have often ended with light or suspended sentences, with courts citing their contributions to the economy. The Lee clan directly owns about five per cent of Samsung Electronics shares, but maintains its grip on the wider group through a byzantine web of cross-ownership stakes involving dozens of companies.

The court said Park was aware that Lee wanted state approval for a controversial merger of two Samsung units in 2015, seen as a key step to ensuring his accession.

The deal was opposed by shareholders who said it wilfully undervalued shares of one of the firms. But it eventually went through after the national pension fund — a major Samsung shareholder — approved it.

Analysts differ on the potential impact of the verdict and sentence on Samsung. Lee has been Samsung’s de facto leader since his father fell ill, but his lawyers and ex-members of the former elite Future Strategy Office (FSO), which dictated the vast group’s overall direction and major business decisions, sought to portray him as naive and inexperienced. “Samsung will not be doomed without Jay Lee,” said Geoffrey Cain, the author of a forthcoming book on the group. “It’s up to the specialists to make their own decisions.”

Samsung appears to have been unaffected by Lee’s absence so far — he was detained in custody in February — with flagship subsidiary Samsung Electronics making record profits on the back of strong demand for its memory chips.

But Chung Sun-Sup, the head of corporate analysis firm chaebul.com, said major chaebol decisions on large-scale acquisitions or investments “are often endorsed by the patriarch of a ruling family”, and with Lee in prison the firm “may move more slowly than before“.

Its shares have soared in recent months, but were down 1.05 per cent this afternoon after the verdict.

The ruling is seen as a strong indicator of the likely outcome in Park’s trial, as some of the charges against the ousted head of state her are inextricably linked to the accusations Lee faced.