[Asia Economy Reporter Kim Hyung-min] The prosecution investigating allegations surrounding the merger of Samsung C&T and Cheil Industries and the succession of Samsung's management rights filed an arrest warrant for Samsung Electronics Vice Chairman Lee Jae-yong (52) on the 4th.
The Economic Crime Division of the Seoul Central District Prosecutors' Office (Chief Prosecutor Lee Bok-hyun) submitted the arrest warrant request to the court on the morning of the same day for Vice Chairman Lee, former Samsung Future Strategy Office Chief Choi Ji-sung (69, Vice Chairman), and former Future Strategy Office Strategy Team Leader Kim Jong-joong (64, President).
Vice Chairman Lee and others were charged with violations of the Capital Markets Act, including unfair trading and market manipulation, as well as violations of the Act on External Audit of Stock Companies. Former President Kim was additionally charged with perjury.
The prosecution believes that the entire process from the 2015 Samsung C&T-Cheil Industries merger to the subsequent accounting changes at Samsung BioLogics was carried out to ensure a stable succession of management rights for Vice Chairman Lee.
To this end, they applied charges of violating the Capital Markets Act, asserting that the merger ratio was justified by inflating the value of Cheil Industries, in which Vice Chairman Lee held a high stake, and lowering the stock price of Samsung C&T.
Samsung C&T and Cheil Industries resolved the merger in May 2015 through their boards of directors, exchanging one share of Cheil Industries for approximately three shares of Samsung C&T.
At that time, Vice Chairman Lee held a 23.2% stake in Cheil Industries, and after the merger, he stably secured shares in the integrated Samsung C&T, which functions as a holding company, thereby strengthening the group's control, according to the prosecution's assessment.
The prosecution also cited violations of the External Audit Act in the arrest warrant, regarding suspicions of accounting fraud at Samsung BioLogics, a subsidiary of Cheil Industries, which triggered this investigation, concluding that the 'window dressing' was intentional.
Samsung BioLogics initially did not reflect the call option (the right to purchase shares at a predetermined price) held by Biogen, a U.S. joint venture partner of its subsidiary Samsung Bioepis, in its accounting. However, after the 2015 merger, it changed its accounting standards by recognizing 1.8 trillion won in liabilities, resulting in a book profit of 4.5 trillion won.
The prosecution judged that Samsung BioLogics improperly changed its accounting standards out of concern for potential issues that could arise if the call option were reflected.
Former President Kim Jong-joong was also charged with perjury. In 2017, he testified as a witness in the trial of former President Park Geun-hye, stating that the merger between Samsung C&T and Cheil Industries was initiated by Cheil Industries and was unrelated to Vice Chairman Lee Jae-yong's succession.
Vice Chairman Lee and former President Kim requested the Seoul Central District Prosecutors' Office on the 2nd to convene the Prosecution Investigation Deliberation Committee to assess the appropriateness of prosecution.
A prosecution official explained, "Separate from the arrest warrant request, we are proceeding with necessary procedures such as forming the Deliberation Committee according to relevant regulations," adding, "No specific schedule has been decided yet."
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