IIT WAS It's been a while since Lee Jae-yong had a court date in his schedule. In 2017, the scion of the family that controls Samsung, the most powerful in South Korea chaebol (conglomerate), was accused of bribing an associate of Park Geun-hye, then president of the country. After being convicted that year, he was imprisoned and released before being paroled and ultimately pardoned in 2022. In 2020, amid this saga, he was indicted for stock price manipulation, abuse trust and audit fraud. Since then, he has appeared before the Seoul Central District Court 95 times.
Mr. Lee's schedule is finally clear. On February 5, the court acquitted him and 13 other Samsung employees of all charges. Mr Lee hopes to put his legal troubles behind him and get back into business.
Both cases stem from the 2015 merger of Cheil Industries and Samsung VS&T, unofficial holding company of the group and major shareholder of Samsung Electronics, its jewel. The deal, which valued each Cheil share at just under three Samsung VS&T shares, transferred control of Samsung from troubled group chairman Lee Kun-hee to his younger son, Mr. Lee, who was Cheil's largest shareholder but had little stake in Samsung VS&T.
Prosecutors alleged that Mr. Lee and his co-conspirators engaged in underhanded practices to inflate Cheil's value relative to Samsung. VS&T. These include the dissemination of false information and illegal lobbying of the South Korean pension fund, a major shareholder of Samsung. VS&T. The sole purpose of the scheme, prosecutors say, was to strengthen Mr. Lee's hold over the group. As a result, other shareholders lost. The court ruled that prosecutors had not provided enough evidence to prove either that the merger was intended to cede control of the group to Mr Lee or that shareholders had suffered a financial loss.
Mr Lee, who maintains his innocence, asked the court to acquit him so that he can focus “on the progress of the company”. Now that it's done, he has a lot to do. The slowdown in parts of the chip business, Samsung's main cash cow, reduced Samsung Electronics' 2023 operating profit to just $5 billion, its worst result since 2008 and down from its peak in 54 billion dollars in 2018. specialty, resumed in the last quarter of 2023. But Mr. Lee still faces challenges, from the Sino-American technology war to tougher competition.
Then there is domestic politics. If the less business-friendly Democratic Party maintains its majority in April's general election, it could revive a bill that would limit the excessive concentration of insurers' assets in individual companies. This would force Samsung Life Insurance, Samsung Electronics' largest shareholder, to sell most of its shares. That would jeopardize Mr. Lee's control of Samsung Electronics, which he exercises through Samsung Life Insurance, in which Samsung VS&T is the largest shareholder. To maintain it, he may have to simplify the conglomerate's byzantine corporate structure.
Mr Lee's acquittal could still benefit his family business. South Korean capitalism, not so much. Last year, the World Bank's arbitration tribunal ruled that the government had inappropriately interfered in the controversial merger. The fact that the Seoul court has now released its architect reinforces the feeling among many investors that chaebol bosses can always do what they want. ■
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