A South Korean court has acquitted Samsung Electronics chairman Lee Jae-yong of financial crimes involving a contentious merger between Samsung affiliates in 2015 that tightened his grip over the country’s biggest company.
The ruling by the Seoul Central District Court on Monday could ease the legal troubles surrounding the Samsung heir less than two years after he was pardoned of a separate conviction of bribery in a corruption scandal that helped topple a previous South Korean government.
The court said the prosecution failed to sufficiently prove the merger between Samsung C&T and Cheil Industries, which was unlawfully conducted with an aim to strengthen Lee’s control over Samsung Electronics.
The ruling was criticised by activists, progressive politicians and commentators, who questioned how Lee could be innocent of all charges when he had previously been convicted in a separate case of bribing a former president while seeking government support for the merger.
People’s Solidarity for Participatory Democracy, a major civic group based in Seoul, described the ruling as a setback for years of efforts to reform the management culture of South Korea’s family-owned conglomerates and their cosy ties with the government.
South Korean corporate leaders often receive relatively lenient punishments for corruption, business irregularities and other crimes, with judges often citing concerns over the country’s economy.
Prosecutors had sought a five-year jail term for Lee, who was accused of stock price manipulation and accounting fraud. It wasn’t immediately clear whether they would appeal.
Lee has denied any wrongdoing in the current case, describing the 2015 merger as “normal business activity”.
Lee, 55, did not answer questions from reporters as he left the court.
You Jin Kim, Lee’s lawyer, praised the ruling, saying it confirmed that the merger was legal.
Lee, a third-generation corporate heir who was officially appointed chairman of Samsung Electronics in October 2022, has led the Samsung group of companies since 2014, when his late father, former chairman Lee Kun-hee, suffered a heart attack.
Lee Jae-yong served 18 months in prison after being convicted in 2017 over separate bribery charges related to the 2015 deal.
He was originally sentenced to five years in prison for offering 8.6 billion won ($9.9 million) worth of bribes to then-president Park Geun-hye and her close confidante to win the government’s support for the 2015 merger, which was key to strengthening his control over the Samsung business empire and solidifying the father-to-son leadership succession.
Park and her confidante were also convicted in the scandal, and enraged South Koreans staged massive protests for months demanding an end to shady ties between business and politics. The demonstrations eventually led to Park’s ouster from office.
Lee was released on parole in 2021 and pardoned by South Korean President Yoon Suk Yeol in August 2022, a move that extended a history of leniency toward major white-collar crime in South Korea and preferential treatment for convicted tycoons.
Some shareholders had opposed the 2015 merger, saying it unfairly benefited the Lee family while hurting minority shareholders.
There was also public anger over how the national pension fund’s stake in Samsung C&T, the merged entity, fell by an estimated hundreds of millions of dollars after Park pressured the National Pension Service to support the deal.
Prosecutors have argued that Lee and other Samsung officials caused damage to shareholders of Samsung C&T, which was a major construction company, by manipulating corporate assets to engineer a merger that was favourable to Cheil, an amusement park and clothing company where Lee had been the biggest shareholder.
Prosecutors also claimed that Samsung executives, through accounting fraud, inflated the value of Samsung Biologics, a Cheil subsidiary, by more than four trillion won to make the deal look fair.
In its ruling, the court said the prosecution’s evidence wasn’t enough to establish that the 2015 merger was conducted through illegal steps or served the sole purpose of strengthening Lee’s control over Samsung Electronics, saying broader business considerations were likely involved.
The court said it was unclear that the deal’s conditions unfairly hurt the interests of shareholders and added that prosecutors failed to prove that Samsung officials committed accounting fraud.
Lee has been navigating one of his toughest stretches as the leader of one of the world’s largest makers of computer chips and smartphones, with Russia’s war on Ukraine and other geopolitical turmoil hurting the world economy and deflating technology spending.
Last week, Samsung reported an annual 34 per cent decline in operating profit for the October-December quarter as sluggish demands for its TVs and other consumer electronics products offset hard-won gains from a slowly recovering memory chip market.
AP