Samsung Tensions Rise Over Lee Jae-yong Summons... Concerns Over Management Disruptions

Lee Jae-yong, Vice Chairman of Samsung Electronics, who has been indicted on charges including bribery to former President Park Geun-hye and 'shadow confidante' Choi Soon-sil, is attending the second retrial hearing held on the 22nd at the Seoul High Court in Seocho-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Dongwoo Lee] As Samsung Electronics Vice Chairman Lee Jae-yong appeared before the prosecution on the 26th regarding suspicions surrounding the Samsung C&T-Cheil Industries merger and Samsung Biologics accounting fraud related to the succession of management rights, tension is rising within Samsung.

Concerns are emerging that Lee's management activities, which had been expanding recently with the declaration of a 'New Samsung,' could be hindered.

This is the first time Lee has been summoned by the prosecution over the Samsung C&T-Cheil Industries merger and management succession suspicions. It is his first appearance before the prosecution in 3 years and 3 months since being detained and investigated by the special prosecutor team led by Park Young-soo in February 2017 on charges of bribing former President Park Geun-hye.

Over the past year and a half, the investigation into the management succession suspicions has involved multiple summons of current and former senior executives from the Future Strategy Office, which acted as the group's control tower, and Samsung C&T, and Lee's summons marks the final stage.

The prosecution suspects that the Samsung C&T-Cheil Industries merger and the accounting changes at Samsung Biologics were carried out to ensure Lee's stable succession of management rights.

Lee's side is expected to actively assert before the prosecution that the accounting changes at Samsung Biologics reflect the growth potential of the bio industry and that the Samsung C&T-Cheil Industries merger is unrelated to Lee's succession of management rights.

Samsung Group is closely monitoring the situation, recognizing that Lee's summons by the prosecution could mark the beginning of another judicial risk.

Lee was detained in February 2017 on charges of bribery related to the state affairs manipulation scandal, released in February 2018 after receiving a suspended sentence, and is currently undergoing a retrial. If the prosecution indicts him regarding the Samsung C&T-Cheil Industries merger suspicions, Lee could face court again. Investigations related to the disruption of the Samsung Electronics Service labor union are also ongoing.

Earlier, on the 6th, Lee declared a break from past mistakes and the start of a new Samsung through a public apology. Although he did not mention the Samsung C&T-Cheil Industries merger or Samsung Biologics accounting issues, he acknowledged that there had been controversies during the management succession process and promised to prevent such issues from arising again.

Subsequently, he met with Hyundai Motor Group Vice Chairman Chung Eui-sun to discuss next-generation electric vehicle battery business and, overcoming the COVID-19 pandemic, visited the semiconductor plant in Xi'an, China, emphasizing proactive crisis response and change. He also announced an investment of about 10 trillion won to establish a semiconductor foundry production line in Pyeongtaek.

The business community is concerned that Samsung could be hampered by judicial risks amid growing uncertainties in the global semiconductor market due to the expansion of the US-China trade dispute and the post-COVID-19 business environment.