Prosecutors say arrest warrant for Lee Jae-yong was not reaction to his request for investigation review board

Posted on : 2020-06-05 18:05 KST Modified on : 2020-06-05 18:05 KST
Authorities seem confident in evidence against Samsung vice chairman
Samsung Electronics Vice Chairman Lee Jae-yong makes a public apology for the controversy surrounding his management succession at Samsung’s Seoul headquarters on May 6. (photo pool)
Samsung Electronics Vice Chairman Lee Jae-yong makes a public apology for the controversy surrounding his management succession at Samsung’s Seoul headquarters on May 6. (photo pool)

After requesting an arrest warrant for Samsung Electronics Vice Chairman Lee Jae-yong on June 4, prosecutors dismissed as “utterly untrue” claims that the request that day had been a “sudden reaction” to Samsung’s request to convene a prosecutorial investigation review board. According to their explanation, the arrest warrant was not requested suddenly in response to Lee’s review board request, but was part of a by-the-book investigation process after the acquisition of sufficient evidence for the charges against Lee.

To begin with, prosecutors appeared confident that they had solid evidence to demonstrate the severity of the crimes as grounds for requesting an arrest warrant. In particular, Lee was reported to have received detailed reports on issues related to the Samsung C&T/Cheil Industries merger through multiple documents bearing the title, “Reported to Vice Chairman Lee Jae-yong,” and to have to also received ongoing “share price management reports” when Samsung affiliates were working to manipulate prices and boost stock values for the sake of the merger. Prosecutors have concluded that Lee’s personal pursuit of a NASDAQ listing for Samsung Bioepis since 2014 was itself ultimately a fraudulent announcement meant to boost share prices. On July 1, 2015, Samsung announced the NASDAQ listing of Cheil Industries sub-subsidiary Samsung Bioepis ahead of a general shareholders’ meeting to approve the merger plan -- but an internal document from earlier that year obtained by prosecutors contained the conclusion that a NASDAQ listing would “not be possible for the time being.” The prosecutors’ conclusion is that Lee himself played a leading role in distorting the decision-making process for shareholders and investors by providing the market with false information in order to achieve a merger that would bring billions of dollars in control benefits.

While procedures have determined that Lee received reports on illegal actions in the management rights succession process as the “ultimate beneficiary” of the Samsung C&T/Cheil Industries merger, Lee himself reportedly denied the claims in two rounds of questioning, where he effectively claimed that the actions had been carried out by executives with the Future Strategy Office on their own initiative. In cases of suspected denying allegations despite clear evidence, prosecutors judge the investigations to require detention due to concerns about evidence destruction.

After concluding their second questioning of Lee on May 29 -- a Friday -- the prosecutors had already finalized their plans to request Lee’s arrest by June 1. Faced with an urgent situation, Samsung abruptly submitted a request on June 2 to convene a “prosecutorial investigation review board” -- a move that led some to speculate that the date of the warrant request and indictment might be pushed back. But having already concluded that an arrest warrant request was inevitable, the prosecutors appear to have determined that there was no need to allow themselves to be swayed by Lee’s “PR campaign.”

“The Seoul Central District Prosecutors’ Office had already made the determination to request an arrest warrant and discussed its approval with the Public Prosecutor General prior to the suspects’ investigation review board request based on factors including the scale of fraud, the severity of the charges, and the resulting economic gains,” the prosecutors explained that day. Another apparent consideration was the fact that prosecutorial appointments are scheduled for July, which raises the risk of the investigation itself being undermined if Lee’s arrest warrant request and indictment are delayed.

The prosecutors’ arrest warrant request undercuts Samsung’s attempt to have the legitimacy of the investigation itself put before the court of public opinion through a review board discussion. With the prosecutors having established sufficient justification for the investigation to request a warrant, they have also ensured its legitimacy even if the request is rejected.

“The warrant request itself is based on the decision that the charges have been demonstrated well enough to require an indictment under detention, so this takes a lot of the wind out of the whole debate over the justification of an indictment,” said one attorney and former chief prosecutors.

By Lim Jae-woo and Kim Jung-pil, staff reporters

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