SEOUL, South Korea — A South Korean court on Monday acquitted Samsung Electronics Chairman Lee Jae-yong of financial crimes involving a controversial merger between Samsung subsidiaries in 2015, tightening his grip on South Korea's largest company.
The ruling by the Seoul Central District Court could ease the legal problems surrounding the Samsung heir less than two years after he was pardoned on a separate bribery conviction in a corruption scandal that helped topple the previous South Korean government.
The court said the prosecution failed to prove that the merger between Samsung C&T and Cheil Industries was conducted illegally with the aim of strengthening Lee's control over Samsung Electronics.
The ruling was criticized 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, South Korea's largest civic group, said the court failed to show “even minimal social justice” by putting Lee's interests ahead of those of shareholders and retirees, whose retirement funds were likely reduced by… The deal, which was approved by the National Retirement Authority.
She called the ruling a setback for years of efforts to reform the management culture of South Korea's family-owned companies and their close ties with the government. South Korean corporate leaders often receive relatively light sentences for corruption, business violations and other crimes, with judges often citing concerns about the country's economy.
Prosecutors had demanded a five-year prison sentence for Lee, who was charged with manipulating stock prices and accounting fraud. It was not immediately clear whether they would appeal the ruling. Lee has denied any wrongdoing in the current case, calling the 2015 merger “normal business activity.”
Lee, 55, did not answer reporters' questions as he left the court. Lee's lawyer, Yoo Jin Kim, praised the ruling, saying it confirms that the merger was legal.
Lee, a third-generation company heir who was officially appointed chairman of Samsung Electronics in October 2022, has led the Samsung conglomerate since 2014, when his late father, former Chairman Lee Kun-hee, suffered a heart attack.
Lee Jae-young spent 18 months in prison after being convicted in 2017 on separate bribery charges related to the 2015 deal. He was originally sentenced to five years in prison for offering bribes worth 8.6 billion won ($6.4 million) to then-President Park Geun-hye and her close friend to win government support. For the merger in 2015, which was key to strengthening his control over the company. Samsung's business empire and the consolidation of leadership succession from father to son.
Park and her close friend were also convicted in the scandal, and angry South Koreans held massive protests for months to demand an end to the shady ties between business and politics. The demonstrations eventually led to Park's removal from office.
Lee was released on parole in 2021, then pardoned by South Korean President Yoon Suk-yeol in August 2022, in moves that extended a history of leniency towards major white-collar crimes in South Korea and preferential treatment of convicted tycoons.
Some shareholders had opposed the merger in 2015, saying it unfairly benefited the Lee family while hurting minority shareholders.
There was also public anger over how the National Retirement Fund's stake in Samsung C&T, the combined entity, was reduced by hundreds of millions of dollars after Park lobbied the National Retirement Service to support the deal.
Prosecutors argued that Lee and other Samsung officials caused harm to shareholders of Samsung C&T, which was a major construction company, by manipulating the company's assets to engineer a merger that favored Cheil, an amusement park and clothing company in which Lee was the largest. a partner.
Prosecutors also alleged that Samsung executives, through accounting fraud, inflated the value of Samsung Biologics, a subsidiary of Cheil, by more than 4 trillion won ($3 billion) in an attempt to make the deal appear fair. The court said in its ruling that the prosecution's evidence was insufficient to prove that the 2015 merger was undertaken through illegal steps or served the sole purpose of strengthening Lee's control over Samsung Electronics, saying there were likely broader commercial considerations at play. The court said it was unclear whether the terms of the deal unfairly harmed shareholders' interests, and added that plaintiffs failed to prove that Samsung officials committed accounting fraud. Samsung Electronics showed no clear sign of business problems when Lee ran the company from behind bars, communicating his decisions through visiting company executives. However, South Korean business lobbyists, including the Korea Chamber of Commerce and Industry, praised Lee's acquittal, saying the breadth of Lee's legal problems would have hampered Samsung's speed and decisiveness in confronting growing competition in semiconductor and other markets.
Oh Si-hyung, an official with the Citizens' Alliance for Economic Justice, said the ruling represents a “breakdown in economic and judicial justice.”
He said: “It is tragic that a not guilty verdict was found in an illegal merger and clear accounting violations, and you must question the roles played by the prosecution and the judiciary that led to this.”
Lee faces one of his most difficult periods as leader of one of the world's largest manufacturers of computer chips and smartphones, with Russia's war on Ukraine and other geopolitical turmoil hurting the global economy and shrinking technology spending.
The company last week reported a 34% year-over-year decline in operating profit for the October-December quarter, as slowing demand for TVs and other consumer electronics products offset hard-won gains from a slowly recovering memory chip market.
“Beer aficionado. Gamer. Alcohol fanatic. Evil food trailblazer. Avid bacon maven.”