Samsung Electronics Chairperson Lee Jae-yong leaves the Seoul Central District Court on Feb. 5 after being acquitted of stock manipulation in a case related to the merger of two Samsung affiliates. (Kim Yeong-won/The Hankyoreh)
A Seoul court acquitted Samsung Electronics Chairman Lee Jae-yong on Monday of charges of stock manipulation and accounting fraud in connection with a 2015 merger of two Samsung affiliates.
Lee was indicted in 2020 for alleged illicit market practices during the merger of Samsung C&T and Cheil Industries Inc. Lee attempted to secure managerial control of the Samsung Group by inflating Cheil shares and driving down Samsung C&T shares, ultimately hurting Samsung C&T investors to serve his personal interest. Yet just three years and five months later, he has been found not guilty on all counts.
In its verdict on Monday, the Seoul Central District Court declared, “Based on the evidence submitted by the prosecution, it’s difficult to verify that the main purpose of the merger of Samsung C&T and Cheil Industries was to solidify Lee’s control over the Samsung conglomerate and take over as successor.”
“Even if Lee was intent on securing managerial control, that in of itself is not illegal,” the court concluded.
In short, the court declared that prosecutors failed to prove that Lee engaged in stock manipulation, illegal lobbying, and accounting fraud during the merger.
This first-round ruling is particularly suspicious, considering its stark contrast to the Supreme Court’s en banc ruling on government influence peddling in 2019. At the time, the Supreme Court viewed the merger not as the result of the management of Samsung C&T and Cheil Industries separately making their respective decisions, but as the result of a single influence that only sought to consolidate conglomerate control. The latest verdict, however, saw the merger as “an attempt by Samsung C&T to overcome stagnation and a company crisis.”
In 2019, Lee was also sentenced to two years and six months for bribing former President Park Geun-hye and her confidante Choi Soon-sil for government interference that would benefit Lee and his position following the merger. According to the latest verdict, however, even the act of bribing the president isn’t illegal. If nothing about the merger was illegal, then why would Lee go through the trouble of risking criminal punishment to butter up and bribe the president? It simply doesn’t add up.
As a key piece of evidence, prosecutors submitted the “Project G” document obtained from Samsung’s now-defunct Future Strategy Office, but the court dismissed it as “just a report on the various options explored by the Future Strategy Office’s finance team to improve the firm’s management structure.”
A detailed plan by a chaebol leader for consolidating corporate control is just a “report”? This is hard to accept.
The ruling also calls into question the professional capacity and determination of the prosecution. Prosecutors ignored recommendations from its investigation review board to terminate the investigation and indictment of Lee, seemingly confident in its ability to win the case. Yet the prosecution couldn’t prove a single one of the 19 charges it levied against Lee.
Moreover, the illegal nature of some of the prosecutors’ search and seizure raids nullified several pieces of evidence. Lee Bok-hyun, the chief prosecutor who led the investigation, has since left the prosecutors' office and is now the governor of the Financial Supervisory Service. It makes one wonder as to whether prosecutors truly did their best to make the charges stick.
If Lee is acquitted again by a higher court, then prosecutors will never escape criticism over their failed investigation.
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