Samsung boss on trial over alleged manipulated takeover

SEOUL • The jailed de facto leader of the giant Samsung group went on trial yesterday over an allegedly manipulated takeover, in proceedings that effectively put South Korea's system of conglomerate control under scrutiny.

Samsung - whose flagship subsidiary is among the world's biggest smartphone and computer chip makers - is by far the largest of the family-controlled empires known as chaebols that dominate business in the world's 12th-largest economy.

Chaebol families often have only a small ownership stake in their empires but maintain control through complex webs of cross-shareholdings between units.

Lee Jae-yong, vice-chairman of Samsung Electronics and grandson of the group's founder, is accused of stock manipulation, breach of trust and other offences when two other subsidiaries, Samsung C&T and Cheil Industries, merged in 2015.

A court spokesman confirmed to AFP that Lee was in court.

He was the largest shareholder in Cheil and critics say Samsung sought to artificially lower the price of C&T to give him a bigger stake in the merged entity - a key part of the Samsung structure - consolidating his grip on the conglomerate ahead of his father's death last year.

He is already serving a 21/2-year prison sentence for bribery, embezzlement and other offences in connection with a corruption scandal that brought down South Korean president Park Geun-hye.

Lee's father, Samsung chairman Lee Kun-hee, died in October, leaving his heirs a vast fortune and an inheritance tax bill of around 13 trillion won (S$15.5 billion), with the first instalment due by the end of this month.

Samsung is crucial to South Korea's economic health, and is active in sectors ranging from construction to healthcare to insurance.

But Mr Vladimir Tikhonov, professor of Korean studies at the University of Oslo, told AFP: "The most problematic aspect is the attempted continuation of the unchallenged dynastic rule over a company which is responsible for over 20 per cent of South Korea's GDP.

"Samsung's main stakeholders are its share owners, including the minor ones, its workers and South Korean society as a whole," he said. "It is too big to be a dynastic property."

The trial was originally due to start last month but was delayed when Lee had emergency surgery for appendicitis.

He apologised last May for some governance issues at the group, pledging to ensure that "there will be no more controversy over the succession" and that he would not allow his children to take over from him at the firm.

AGENCE FRANCE-PRESSE