Court rejects Samsung heir's arrest

 

A court rejected an arrest warrant for Samsung Group's heir, made by the independent counsel team probing South Korea's presidential scandal.

The Seoul court early Thursday dismissed the warrant to detain Samsung Electronics Vice Chairman Lee Jae-yong, which was requested on Monday by the special prosecutors.

The marathon deliberation continued for almost 15 hours, as the court said it was hard at the present stage to acknowledge the necessity for arrest in view of a room for dispute over the quid-pro-quo that justifies the bribery case.

Lee, who had been waiting for the determination at the Seoul detention center, will return home immediately.

The rejection indicated lack of evidence on charges, which prosecutors leveled against the Samsung heir. The charges include bribery, perjury and embezzlement.

He became the first member of Samsung's founding family to face the arrest warrant in eight decades of history of the country's largest family-controlled conglomerate. Samsung was set up in March 1938.

Samsung's founder Lee Byung-chul was investigated in 1966 for a smuggling charge, but he was not punished.

His son Lee Kun-hee was sentenced in 1996 to a suspended two-year jail term for bribing politicians, but was pardoned about 13 months later. The 2008 suspended three-year prison term for his tax evasion also ended with presidential pardon the following year.

The arrest request for the third-generation heir was met again with concerns about the country's most influential conglomerate and the South Korean economy. The younger Lee has been in effect leading the business empire since his father Chairman Lee was hospitalized in May 2014 for heart attack.

Spokesman of the independent counsel team said Monday that its attempt to arrest the younger Lee was aimed to "establish justice" though it acknowledged possible effects on the South Korean economy.

It was part of efforts to eliminate the long-running collusion between politicians and businessmen, which may be partly rooted in the conglomerate-led industrialization under the military dictatorship that lasted for around three decades to late 1980s.

The judicial authorities granted clemency once again to chaebol families for criminal charges. The Samsung heir is suspected of being involved in South Korea's biggest-ever bribery case, which prosecutors estimated at about 43 billion won (37 million U.S. dollars).

LITTLE EFFECT ON ENTIRE ECONOMY

Nearly 70 affiliates of Samsung are known to hire some 250,000 employees. The industrial empire, whose business ranges from smartphones and home appliances to ships, insurance and biosimilar, generates over 300 trillion won (256 billion U.S. dollars) per year in revenue.

"In terms of added value, Samsung accounts for nearly 4 percent of (South) Korea's total GDP. However, Lee's detention would have had little effect on the economy as no problem is expected to be found in Samsung's operations," Park Ju-Geun, president of CEO Score, a business data provider, told Xinhua.

Samsung has professional management teams in each unit, which imply smooth operations without Lee, the CEO Score head forecast. Prosecutors excluded three Samsung executives from the arrest list to minimize a possible management vacuum following Lee's detention.

Samsung might have prepared for Lee's detention given that some of its executives had sold Samsung Electronics shares from late December through Tuesday, the expert on conglomerates said citing recent regulatory filings.

Samsung Electronics shares, which fell sharply after news that the arrest warrant for the vice chairman was sought, bounced back on Tuesday and lost just 0.05 percent on Wednesday.

With the rejected detention, Samsung is forecast to speed up the reorganization of corporate governance and the investment in new growth engines, which require Lee's decisions, said Park.

The restructuring efforts to increase Lee's control were launched in the 2015 merger between Samsung C&T and Cheil Industries to create an interim holding company.

Samsung Electronics announced a plan in late November to split itself into two, among which one is projected to become a holding company with treasury stocks that would be merged in the end with the interim holding firm.

The merged holding company would raise its stake in Samsung Electronics, the crown jewel of the conglomerate, to almost 20 percent. Lee is expected to control the eventual holding firm.

The CEO Score chief said the attempt to strengthen the younger Lee's management control would highly likely be in a hurry as presidential contenders in the opposition bloc argue for chaebol reform, which will make it difficult to enhance corporate governance for the Samsung heir.

BRIBERY CHARGE

Samsung is suspected of bribing President Park Geun-hye's longtime confidante Choi Soon-sil and Choi's daughter in return for getting support from the national pension fund for the July 2015 merger.

The merger was extremely crucial to the heir apparent to inherit the overall management control from his ailing father Chairman Lee who has been hospitalized for over two and a half years for heart attack.

Prosecutors contended that Park and Choi had shared private interests, saying Samsung provided about 43 billion won (37 million U.S. dollars) in financial assistance to two foundations and a German company controlled by Choi.

In exchange for the kickbacks, Park is suspected of ordering the former health and welfare minister, who is currently in custody, to pressure the National Pension Service (NPS) into voting for the Samsung merger.

The NPS was then biggest shareholder of Samsung C&T, a construction unit which in effect became the holding company of Samsung after the merger. The impeached leader and the Samsung heir met face-to-face around the time of the merger.

Refuting the accusations, Lee's legal team reportedly denied any quid-pro-quo in the financial assistance, which it said had been provided for fear of getting business disbenefits when rejecting the president's request.

source: Xinhua