Prosecutors are seeking a warrant to arrest Samsung Group’s Jay Y. Lee for allegations including bribery and embezzlement, a stunning turn for the scion of South Korea’s richest family groomed for decades to take over the company from his father.
Lee, 48, the de facto head of the Samsung Group and vice chairman of Samsung Electronics Co, is accused of participating in payments that Samsung made to Choi Soon-sil, a close friend of South Korean President Park Geun-hye, in exchange for government support in the company’s succession planning.
A court would still have to determine whether to approve the warrant, which was announced by prosecutors in a briefing yesterday.
A hearing is scheduled for tomorrow.
A special prosecution team was established last month to investigate whether Samsung and other chaebol business groups contributed money to Choi in exchange for political favors. Park has been already impeached and her powers suspended. Samsung shares, which have been near record highs, fell 2.1 percent to 1,833,000 won at the close in Seoul.
“We believe that there was an illegal request made by Samsung in facilitating the process of business succession,” Lee Kyu-chul, a spokesman for the prosecutor’s office, said in the briefing.
The arrest warrant would let prosecutors continue their probe while Lee is detained. Formal charges and an indictment would follow.
The total amount of bribes, including promised funds and money embezzled is alleged to be about 43 billion won (US$36.34 million), Lee said.
Samsung denied the company provided financial aid in return for any favors.
“We can’t accept the prosecutor’s argument that we made illegal requests associated with the merger and management succession,” Samsung Group said in a statement. “We believe the court will make a wise decision.”
The investigation jeopardizes Lee’s ability to take over Samsung Group and risks further destabilizing the leadership of South Korea’s largest company. His father, Samsung Group chairman Lee Kun-hee, has been hospitalized since suffering a heart attack in 2014.
“If Lee is imprisoned, it will damage Samsung’s reputation as well as South Korea’s economy in general,” said Park Sang-in, an economics professor at Seoul National University. “Samsung represents the country’s economy.”
The presidential scandal has gripped South Korea for months, with millions taking to the streets to demand the ouster of Park Geun-hye.
In recent weeks, investigators have focused on Samsung to determine whether the company made payments to gain the backing of South Korea’s national pension fund for a controversial merger between Samsung affiliates in 2015.
Prosecutors have homed in on Samsung’s contributions to entities linked to Choi, including a 1 billion won horse for her daughter and millions of US dollars for riding lessons. The money allegedly was in exchange for helping ensure a smooth transfer of power at Samsung to the younger Lee.
One key question is whether the administration exerted pressure on South Korea’s National Pension Service (NPS) to support the controversial merger of two Samsung Group companies, Cheil Industries Inc and Samsung C&T Corp. The controversial deal was approved in 2015 and made it easier for Lee to gain influence over the sprawling conglomerate.
The merger of Cheil and Samsung C&T was opposed by activist investor Paul Elliott Singer and succeeded by a narrow margin, thanks to the support of the NPS, then the biggest shareholder of Samsung C&T.
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