South Korea’s appeals court has thrown Samsung’s Lee Jae-yong back in jail for bribery, in a landmark ruling that will leave the country’s biggest conglomerate without its top decision maker for a year-and-a-half.
Seoul’s high court on Monday sentenced Lee to two-and-a-half years in prison following a retrial, although prosecutors had sought a nine-year term. The billionaire, who was immediately detained after the ruling, will only spend 18 months behind bars as he previously spent a year in prison before being released by an appeals court in 2018.
The final ruling, which followed years of legal wrangling, is a setback for Samsung, whose electronics unit is the world’s biggest manufacturer of computer chips, smartphones and electronic displays.
The case has been watched closely as a test of the government’s resolve in reforming South Korea’s powerful family-run conglomerates, known as chaebol.
Samsung shares fell 3.4 per cent in Seoul trading on Monday.
Lee’s retrial was held after the supreme court overturned a lower court’s ruling in 2019.
The court said Lee had shown a willingness to make the group more transparent by setting up a stronger compliance committee but questioned its effectiveness.
Lee has been the de facto head of Samsung since 2014 when his father, and then chairman Lee Kun-hee, suffered a heart attack. He formally took control of the group after his father died in October.
Lee Jae-yong was originally convicted in 2017 and received a five-year jail term for bribing former president Park Geun-hye in an alleged attempt to secure control of Samsung. Park was impeached and sentenced to 20 years in prison.
South Korea's supreme court had ruled that horses donated by Samsung for training by the equestrienne daughter of Park’s confidante, Choi Soon-sil, and the company’s contribution to a sports foundation controlled by Choi should be considered bribes.
“Today’s ruling is too generous,” said Park Sang-in, an economics professor at Seoul National University. “He should have received at least a five-year prison sentence, given his serious crimes.”
However, some analysts had expected a reprieve for Lee on Monday, given Samsung’s importance to the South Korean economy, which has been hit by coronavirus. “It is positive in that some . . . judicial justice has been realised. Authorities seem to have struck a balance between economic growth and chaebol reform,” said Park Ju-geun, head of market research firm CEOScore.
Lee In-jae, Lee’s lawyer, expressed regret over the court’s decision following the ruling. “The case is about the former president abusing her power and intruding on corporate freedom and [Samsung’s] property rights.”
Lee’s imprisonment comes at a critical juncture for Samsung, which is accelerating its push into technologies such as artificial intelligence and parts for autonomous vehicles.
It is expected to put on hold Lee’s plans to reorganise Samsung’s sprawling business interests. The Lee family faces a tax bill of up to $10bn that is expected to trigger a series of complex share sales at non-core units. “The group-wide restructuring and its aggressive investments in new businesses are likely to be on hold,” said Mr Park at CEOScore.
President Moon Jae-in, a former human rights lawyer entering the final 12 months of a five-year term, on Monday sought to defend his attempts to reform powerful family-owned conglomerates like Samsung and Hyundai, which dominate South Korea’s economy.
Asked by the Financial Times whether these reforms had failed, Mr Moon pointed to amendments by his government to corporate and labour laws designed to strengthen the rights of smaller shareholders and workers, respectively.