Samsung Vice President Hit With Jail Sentence

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Jay Y. Lee, vice chairman of Samsung Electronics Co., was convicted of bribery and sentenced to five years in prison, a blow to the heir apparent of the world’s biggest maker of smartphones and memory chips.

A three-judge panel of Seoul Central District Court found Lee guilty of bribery, perjury and embezzlement on Friday. The 49-year-old has been in detention since February and proclaimed his innocence throughout the trial and his lawyer said he would appeal the verdict. Prosecutors had sought 12 years in prison.

Samsung

The ruling casts doubt over Lee’s return to the conglomerate his grandfather founded almost 80 years ago and is now in a battle for smartphone supremacy with Apple Inc. Since his arrest in February, Samsung Electronics has bounced back from last year’s exploding Note 7 fiasco to release a new flagship and post record earnings with its shares also reaching an all-time high.

Lee also joins the list of Korean business leaders to be convicted of corrupt behavior, one that already includes his father Lee Kun-hee. The elder Lee received a suspended three-year prison sentence for evading taxes and embezzling corporate money.

Along with Lee’s sentencing, former Samsung executives were also convicted Friday. Former Samsung Corporate Strategy Office chief Choi Gee-sung and former President Chang Choong-ki were each sentenced to four years in prison, while two other executives got suspended prison terms.

This year’s case, dubbed the “Trial of the Century,” transfixed the nation as it shone a spotlight on the interaction between South Korea’s chaebol and the political elite. Through hundreds of hours of testimony from dozens of witnesses, prosecutors sought to draw a link between backing from a state-run pension for a 2015 merger of Samsung affiliates and money paid to a confidante of then President Park Geun-hye, including an $800,000 horse for the friend’s daughter.

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Lee, choking back tears at times, testified that he knew little about Samsung affiliates other than the electronics business, and that he wasn’t part of the approval or decision-making process. Song Wu-cheol, Lee’s lawyer, said they would appeal the ruling.

Samsung is comprised of about 60 units selling life insurance to ships. Since Lee’s arrest, the electronics unit has posted record net income and released the Galaxy S8 smartphone to critical and commercial success. Semiconductor sales are booming, shares reached an all-time high and it has just unveiled the new Note 8 device.

Controlled by the Lee family through a web of cross-holdings, Samsung is South Korea’s biggest conglomerate and the empire has a market capitalization of about $395 billion.

Samsung Electronics makes up most of that, with a value of $272 billion. It is the world’s biggest maker of smartphones and memory chips, with customers including Apple, Wal-Mart Stores Inc. and Microsoft Corp., according to supply chain data compiled by Bloomberg.

Samsung shares have risen 30 percent this year, outperforming the benchmark Kospi. The index was little changed on Friday.

Brushes with the law aren’t new to the Lee family. Lee Kun-hee received a suspended three-year prison sentence for evading taxes. He was later pardoned by then-President Lee Myung-bak. The younger Lee’s absence could lead to further empowerment of managers such as Vice Chairman Kwon Oh-hyun, who oversees semiconductors; President J. K. Shin, who is in charge of mobile products; and President Yoon Boo-keun, who runs the consumer appliances business.

Credit: Bloomberg

 

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