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Samsung Electronics Vice Chairman Lee Jae-yong heads to the Seoul Central District Court for questioning on June 8. (Yonhap News)

South Korea’s public prosecutors are putting Samsung Electronics Vice Chairman Lee Jae-yong and 10 other executives on trial, after concluding that a campaign to help Lee inherit control over the Samsung Group had involved wholesale illegality. The prosecutors explained that they’d decided to indict Lee and the others, despite being recommended not to do so by an investigation review board, because of the “gravity of the charges, the obviousness of the evidence, and the need to reach a judicial decision on a case that has aroused suspicions in the public.”

On Sept. 1, the economic crimes division at the Seoul Central District Prosecutors’ Office, led by Lee Bok-hyeon, issued indictments without detention against seven people for professional malpractice and for unfair trading practices and stock price manipulation under the Capital Markets Act. The charges are linked to allegations of irregularities in the merger between Cheil Industries and Samsung C&T. The seven people indicted include Lee Jae-yong; Choi Gee-sung, former head of the Samsung Group’s defunct Future Strategy Office (FSO); Kim Jong-joong, head of strategy at the office; Choi Chi-hoon, chairman of the board at Samsung C&T; and Kim Shin, former CEO of Samsung C&T.

The prosecutors also indicted six people, including Lee Jae-yong and Samsung BioLogics CEO Kim Tae-han, for alleged fraudulent accounting at Samsung BioLogics, which would represent a violation of the Act on External Audit of Stock Companies. Kim Jong-joong and Kim Shin are also charged with perjury for testifying during Lee Jae-yong’s influence-peddling trial that the merger of Cheil Industries and Samsung C&T was unrelated to the succession of management rights at Samsung.

The prosecutors have concluded that the succession plan, known as Project G, was carried out under the leadership of Lee Jae-yong himself and the FSO. The plan aimed to find the cheapest way for Lee to boost his control over Samsung Group subsidiaries. The centerpiece of the plan was the merger of Samsung C&T with Cheil Industries, in which Lee held a majority share. The prosecutors believe that various unfair trading practices as defined under the Capital Markets Act occurred during the course of that merger, such as price manipulation, the concealment of important information, and the leaking of misinformation to investors in Samsung C&T.

The prosecutors also believe that the merger was carried out for Lee’s personal aggrandizement, while inflicting losses on Samsung C&T stockholders. That prompted them to add the charge of professional malpractice, which was not included on the request for an arrest warrant against Lee that they filed back in June.

The prosecutors’ decision provoked fierce pushback from Lee’s attorneys. “The explanation and evidence provided by the prosecutors do not contain anything of novelty that would merit a fresh rebuttal. We are forced to conclude that the prosecutors carried out their investigation from the outset with the preordained goal of indicting Lee Jae-yong and the Samsung Group, rather than allowing the evidence to lead them to the actual truth,” the attorneys said in a position statement released on Tuesday.

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

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