Samsung heir denies charges as trial begins

Lee Jae Yong at the Seoul Central District Court yesterday. Besides bribery, he is accused of hiding assets overseas, perjury and hiding criminal profits.
Lee Jae Yong at the Seoul Central District Court yesterday. Besides bribery, he is accused of hiding assets overseas, perjury and hiding criminal profits.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Prosecutors say former govt aide's notebooks back claims that Lee Jae Yong bribed ex-president's friend

SEOUL • South Korean prosecutors laid out their case against the heir to the huge Samsung business empire by revealing how a former top government aide documented instances of alleged bribery in 39 handwritten notebooks.

Wearing a grey suit without a tie, Lee Jae Yong listened calmly as prosecutors took an hour to outline charges against him during his first court appearance in the graft scandal that cost former South Korean president Park Geun Hye her job.

Lee denied the bribery charges yesterday.

His lawyer said: "It was an assistance made following the president's request to promote cultural prosperity and sports development, which did not involve getting any favours in return."

Prosecutors said notebooks from An Chong Bum, a former chief secretary for economic affairs and policy coordination, back claims that Lee ordered money funnelled to Ms Park's friend to secure government backing for a pivotal 2015 merger of Cheil Industries and Samsung C&T. That deal is said to have helped shore up Lee's control over Samsung.

"Business restructuring is one of Samsung's various corporate management activities," the lawyer said. "It was not for transferring power."

Dubbed the "trial of the century", the proceedings threaten to expose a complex web of ties between the government and the nation's largest corporations, and have cast uncertainty over succession at South Korea's biggest conglomerate.

BLACK MARK

As long as Lee is locked up, it won't be easy for Samsung to restore its reputation completely.

MR KOO CHANG HWAN, chief of the Korea Reputation Centre, on the impact of Lee Jae Yong's detention on Samsung.

Yesterday's hearing at Seoul's Central District Court coincided with the release of Samsung's best quarterly earnings in almost four years.

The world's largest maker of smartphones reported a better- than-projected 48 per cent rise in operating income to 9.9 trillion won (S$12.2 billion) for the March quarter, fuelled by robust sales of memory chips and displays.

The trial also overshadowed the start of pre-orders in South Korea for the S8 - Samsung's answer to Apple's iPhone.

"As long as Lee is locked up, it won't be easy for Samsung to restore its reputation completely," Mr Koo Chang Hwan, chief of the Korea Reputation Centre, said before yesterday's hearing began.

The broader electronics-to- energy Samsung group has been in transition since Lee's father suffered a crippling heart attack in 2014.

The prolonged absence of its de facto head may further delay major decisions.

Still, the company has said it has got a strong management team in place to run the business. And the company's shares have risen about 16 per cent this year, about three times the gain in the benchmark Kospi.

The stock was little changed yesterday.

Lee is the highest-profile business figure indicted in a sprawling investigation that has spurred outrage over "chronic corruption" in ties between the government and family-run conglomerates.

Other counts against Lee include hiding assets overseas, perjury and hiding criminal profits, all related to the bribery case.

A verdict for Lee is expected by the end of next month under a special prosecution law that calls for fast-tracking the case. Lee faces five years to life in prison if convicted.

Ms Park and her friend, Choi Soon Sil, have been arrested. Both have denied wrongdoing.

Apart from Samsung, other top South Korean firms, including SK and Lotte, reportedly donated money to non-profit foundations controlled by Choi.

Lotte Group chairman Shin Dong Bin was called in as a reference witness yesterday by South Korean prosecutors who want to establish solid bribery charges against the former president.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on April 08, 2017, with the headline 'Samsung heir denies charges as trial begins'. Print Edition | Subscribe