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25 August 2017

Samsung Heir Lee Jae-yong Jailed For Corruption

A court in South Korea has sentenced Samsung’s billionaire heir-apparent Lee Jae-yong to five years in prison for corruption.

Mr Lee was convicted of bribery in a scandal that also saw the impeachment of South Korea’s former president.

The case has gripped the public amid growing anger against South Korea’s biggest companies, known as chaebols.

Mr Lee, who denied all charges, had faced a jail sentence of up to 12 years.

Also known as Jay Y Lee, the de facto head of the world’s largest smartphone maker had been detained since February on a string of corruption charges.

These included bribery, embezzlement and hiding assets overseas.

What did he do?

The 49-year-old is accused of giving donations worth 41bn won ($36m; £29m) to non-profit foundations operated by Choi Soon-sil, a friend of South Korea’s former President Park Geun-hye, in return for political favours.

Prosecutors said the donations were made to Ms Park’s confidante to win government support for a big restructuring of Samsung that would strengthen Mr Lee’s control over Samsung Electronics.

But Mr Lee’s defence team said that the payments were signed off without his knowledge.

Mr Lee has previously admitted that the firm also gave a horse and money to help the equestrian career of Choi’s daughter, Chung Yoo-ra, but denied seeking favours.

His lawyer said on Friday they would appeal against the court’s decision.

“We are confident the ruling will be overturned,” lawyer Song Wu-cheol told reporters after the ruling, according to Reuters.

Who else is involved?

The case contributed to President Park’s eventual impeachment and she now faces trial for corruption herself, something she denies.

Her friend Choi has already been jailed for three years after being found guilty of using her position of influence to solicit favours for her daughter.

On Friday, two other Samsung executives, Choi Gee-sung and Chang Choong-ki, were also convicted in the same trial as Mr Lee and sentenced to four years in prison.

Will Mr Lee serve his jail sentence?

Analysis – by the BBC’s Yogita Limaye in Seoul

This isn’t the first time a top executive of a big conglomerate has been convicted for corruption in South Korea.

But in the past, they’ve either been given suspended sentences or have been pardoned by the president.

The new president, Moon Jae-in, has already said there will be no more presidential pardons.

So if Mr Lee’s sentence is upheld by higher courts and he ends up serving his complete sentence in jail or a significant part of it, that will be a departure from what we’ve seen in South Korea in the past.

And the new government says that will be a strong message to chaebols that they need to clean up the way they do business.

What does it mean for Samsung?

The conviction represents a huge blow to South Korea’s biggest and most well-known business empire. Since the verdict, Samsung shares fell by 1%.

It also raises questions about the future leadership of the family-run conglomerate. Mr Lee has been standing in as chairman since his father, Lee Kun-hee, suffered a heart attack in 2014.

Mr Lee has two sisters, who are in management roles in different parts of the Samsung group, but it is unclear whether they could be brought in to higher positions.

Since Mr Lee’s arrest six months ago, the group’s business operations have continued largely unaffected.

Samsung Electronics posted a record profit of 11tn won for the latest quarter and the firm has released its new flagship Galaxy S8 smartphone , closing the book on the disastrous recall of the exploding Galaxy Note 7.

The Samsung Group, made up of 60 interlinked companies, is crucial to the South Korean economy, with sales equivalent to about a fifth of the national GDP.

The chaebol includes a shipbuilding division, a construction company, and pharmaceuticals and advertising arms. Other chaebols include LG, Lotte and Hyundai.

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