A South Korean court sentenced the billionaire chief of Samsung to five years in prison for crimes that helped topple the country’s president, a stunning downfall that could freeze decision making at a global electronics powerhouse which has long been run like a monarchy.
The Seoul Central District Court said yesterday that Lee Jae-yong, 49, was guilty of offering bribes to Park Geun-hye when she was South Korea’s president, and to Park’s close friend, to win government support for efforts to cement his control over the Samsung empire. The revelations that led to Lee’s arrest in February fed public outrage which contributed to Park’s removal.
A panel of three judges also found Lee guilty of embezzling Samsung funds, hiding assets overseas, concealing profit from criminal acts and perjury. Prosecutors had sought a 12-year prison term.
The court said Lee and Samsung executives who advised him caused “a big negative effect” to South Korean society and its economy.
“The essence of the case is unethical collusion between political power and capital,” the court said. It led the public to fundamentally question the public nature of the president’s work and to have “mistrust in the morality of the Samsung group”, it said.
The families who control South Korea’s big conglomerates, known as chaebol, were praised a generation ago for helping to turn South Korea into a manufacturing powerhouse but public tolerance for double standards that put them above the law has been rapidly diminishing.
Analysts said the verdict will not immediately have an impact on Samsung’s business operations, which are overseen by three chief executives. The company has successfully weathered past crises that include two recalls of Galaxy Note 7 smartphones prone to catch fire and Lee’s arrest. It is set to report its highest-ever earnings this year.
But long-term business decisions, such as finding future growth areas and identifying companies for acquisitions, may have to be put on hold.
“South Korea’s chaebol system is similar to monarchy,” said Park Sang-in, a professor at Seoul National University. “You need a king.”
There is also potential for a destabilising family feud over inheritance when Lee’s father dies.
“Samsung was in the middle of change and that has stopped,” said Park Ju-gun, chief executive at CEO Score, a private corporate watchdog.
Business lobby groups expressed concerns that Lee’s absence from the helm of Samsung would take a toll on the South Korean economy. Samsung accounts for about one fifth of the nation’s exports.
“Samsung Electronics represents South Korea as a global company so we are deeply worried about the fallout from his long absence,” said a Korea Employers Federation spokesman. “It will be a disaster not just to an individual company but to the nation’s economy.”
The verdict, however, could be good news for shareholders at South Korean companies who have complained about weak corporate governance that let founding families wield outsized influence and enjoy authority even with minority ownership.
South Korean president Moon Jae-in’s office welcomed the ruling as a step toward rooting out corruption. “We hope that it would pave the way to end persistent government-business collusion, which has hampered society from moving forward,” its spokesman Yoon Young Chan said.
Lee was accused of offering £30million in bribes to four entities controlled by Choi Soon-sil, a long-time friend of Park, in exchange for government help with a merger that strengthened Lee’s control over Samsung after his father suffered a heart attack in 2014.