Samsung’s Jay Y. Lee is found not guilty of fraud and manipulating stock prices

On Monday, Samsung's Jay Y. Lee was found not guilty of financial crimes charges by a Seoul Central District Court.

Samsung’s Jay Y. Lee is found not guilty of fraud and manipulating stock prices
Samsung Electronics Chairman Jay Y. Lee leaves a court in Seoul, South Korea, February 5, 2024. REUTERS/Kim Soo-hyeon

The backstory: For decades, South Korea's economy has been dominated by several family-run conglomerates that have a lot of money and political power. These families are known as chaebol. One of the biggest and most successful members is Samsung, which is also one of the world's biggest makers of tech like computer chips and smartphones. Jay Y. Lee (Lee Jae-yong), grandson of the company's founder, has been at the helm of Samsung Group since his late father, former chairman Lee Kun-hee, suffered a heart attack in 2014. He's also the country's richest person, according to Bloomberg. 

But Lee has faced lots of legal issues over the years. In 2017, he was accused of bribery and corruption. This was tied to the impeachment of former President Park Geun-hye, who was accused of collecting bribes from Samsung and other chaebols on top of abusing her power. Lee was charged with bribing Ms. Park and her associate to get support for a 2015 merger of two Samsung subsidiaries – Samsung C&T and Cheil Industries.

More recently: In 2017, Lee was sentenced to five years on the bribery charges. His sentence was then suspended, and he was released in 2018 pending a retrial. His initial sentence was later reduced at the retrial, and he was released on parole in 2021 with a five-year employment ban. But a full presidential pardon in 2022 meant he could again take his spot at the top of the Samsung Group.

But, in between Lee's retrial and release, he was indicted in 2020 for separate stock price manipulation and accounting fraud charges related to the 2015 merger. He wasn't arrested then because the court didn't issue an arrest warrant. 

The development: On Monday, Lee was found not guilty of the 2020 financial crimes charges by a Seoul Central District Court, with the judge saying there wasn't enough proof against Lee and 13 other current and former Samsung officials. This included the prosecution's allegations that the main intention of the merger was to strengthen Lee's power over the conglomerate, even though it wasn't in the best interests of each Samsung affiliate in the merger. Prosecutors were after a five-year sentence and a fine of 500 million won (US$376,000), but Lee has said he's innocent. Prosecutors have the option to appeal the decision in a higher court.

Key comments:

"Even if Lee's control has been strengthened, the merger in this case cannot be considered unfair, as long as there is a reasonable purpose for the merger," Seoul Central District Court chief judge Park Jung-jae said.

"The ruling reflects the economic sentiment," said Kim Sung-soo, who teaches political science at Seoul's Hanyang University, about Monday's ruling. "There are people who don't want to shackle Korea's biggest company, though there will be people who will raise questions about justice." 

"It is very unfortunate that Samsung, the country's top company and proud global innovator, is repeatedly involved in crimes whenever there is a change in political power," a South Korean court said at the time of Jay Y. Lee's 2021 bribery conviction.

"In a time of worsening business environments, incarcerating businessmen for a long time does tremendous damage not only to their companies but also to the national economy," said Kim Kyong-man, an executive at the Korea Federation of Small and Medium Business.

"It's tragic that a wrongful merger and clear accounting irregularities were ruled as not guilty, and you have to question the roles played by the prosecution and the judiciary that led to this," said Oh Se Hyung, an official at the Citizens' Coalition for Economic Justice.