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South Korean prosecutors sought a five-year prison sentence and a 500 million KRW fine, equivalent to $375,000, for Samsung Electronics Chief Jay Y. Lee at an appeals court on Monday. The appeals case comes 10 months after Lee and 13 former Samsung executives were originally acquitted of manipulating stock prices and committing accounting fraud in connection with the merger of Samsung subsidiaries in 2015, a merger that increased his control over the tech giant.
A decision on the appeals case is expected to be delivered sometime between January and February 2025, according to a local media outlet.
The hearing is significant for two reasons. First, it comes amid a tough period for Samsung, the leading maker of memory chips, as the company navigates slowing profits. Second, it’s a signal of how the country is slowly working to reform how corporates are structured, which will have a lot of ramifications not just for the global consumer electronics based out of the country, but also competition in Korea’s technology ecosystem more widely, including its startups.
The prosecutors said on Monday: “The defendant damaged the capital market’s foundation for the group’s succession… The ruling in this case will serve as a reference point for restructuring chaebol companies, [which is a large, family-controlled business conglomerate in South Korea], and accounting in the future.”
If the defendants are granted leniency, the merger will be carried out in a manner that prioritizes their interests by resorting to unlawful and expedient means without hesitation, the prosecutors added.
South Korean prosecutors have been after Lee for years now. In November of last year, they called for Lee to be sentenced to five years in jail and fined 500 million KRW (the same requests they made today) over charges of violating the Capital Market Act related to an $8 billion merger of Samsung affiliates in 2015. They claimed that the merger assisted Lee in gaining control of the Korean electronics company.
Lee refuted the misconduct allegations during the November 2023 hearing and asserted that the merger process was within the scope of standard operational procedures for the company.
In September 2020, Lee, then the vice-chair of Samsung Electronics, along with other former Samsung executives were indicted for advocating the merging of Cheil Industries, Samsung’s textile affiliate, with Samsung C&T, its construction unit, to take over the tech giant’s management controls in 2015.
They were also accused of inflating the stock price of Cheil and Samsung C&T and fraudulent accounting at Samsung Biologics, in which Cheil held a significant stake, as part of the same case. The prosecution claimed that Samsung had a strategy to merge that helped Lee solidify his control and take over management rights.
Kate Park is a reporter at TechCrunch, with a focus on technology, startups and venture capital in Asia. She previously was a financial journalist at Mergermarket covering M&A, private equity and venture capital.
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