Samsung heir formally charged

As well as bribery, embezzlement and hiding assets overseas, Lee is also charged with perjury in connection with a graft and power abuse scandal that has seen South Korean President Park Geun Hye impeached.
As well as bribery, embezzlement and hiding assets overseas, Lee is also charged with perjury in connection with a graft and power abuse scandal that has seen South Korean President Park Geun Hye impeached.PHOTO: REUTERS

SEOUL • The heir to the Samsung empire and four other executives were indicted yesterday on charges including bribery and embezzlement, South Korean prosecutors said, in the latest blow to the world's biggest smartphone maker.

The presentation of formal charges against Lee Jae Yong and his colleagues makes them almost certain to face trial, casting new uncertainty over South Korea's biggest business group as it seeks to recover from a humiliating product recall.

As well as bribery, embezzlement and hiding assets overseas, Lee is also charged with perjury, said the spokesman for prosecutors probing a corruption and power abuse scandal that has seen President Park Geun Hye impeached.

Three of the five men - but not Lee, the vice-chairman of flagship subsidiary Samsung Electronics - have resigned their positions. Soon after the prosecutor's announcement, Samsung Group said it would disband its corporate strategy office, a decision-making unit for the conglomerate that has been linked to the graft probe.

Vice-chairman Choi Gee Sung, indicted alongside Lee, and other executives at the strategy office are stepping down, with affiliates to be managed by their respective boards and CEOs.

Under this "reform plan", each Samsung unit will be allowed to run more independently, a powerful group body handling government lobbying will be disbanded and decisions over donations will be made more transparent, the group said.

But Mr Chung Sun Sup, the head of chaebol.com, a private watchdog forum on conglomerates, said: "It is yet to be seen whether this is another cosmetic measure aimed to divert public criticism."

In the past, he told AFP, "Samsung has dissolved group-controlling organisations when it got caught in breach of laws, only to revive them afterwards under different names".

The tech giant, whose group revenues are equivalent to a fifth of the country's GDP, is struggling to recover from the embarrassing recall crisis over its Galaxy Note 7 smartphone last year.

The corruption scandal centres on Choi Soon Sil, who is accused of using her close ties with President Park to force local firms to "donate" nearly US$70 million (S$98 million) to non-profit foundations, money which Choi allegedly used for personal gain.

Samsung, the single biggest donor, is also accused of separately giving millions of euros to Choi to bankroll her daughter's equestrian training in Germany.

The 48-year-old Lee, the scion of Samsung's founding family, has effectively helmed the group since his father's heart attack in 2014.

One of the favours Lee allegedly sought from Ms Park was state approval for a controversial merger in 2015 of two Samsung units, seen as a key step to ensure a smooth power transfer to him.

The deal was opposed by many shareholders who said it had wilfully undervalued shares of one of the two firms. But it eventually went through after the national pension fund - a major Samsung shareholder - approved it.

Lee has denied all accusations.

AGENCE FRANCE-PRESSE, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 01, 2017, with the headline 'Samsung heir formally charged'. Print Edition | Subscribe