'New Samsung' Faces Leadership Void After 3 Years... "Strong Regret Over Prosecution's Detention Warrant" (Comprehensive)

[Asia Economy Reporter Kim Hyewon] With the request for an arrest warrant for Samsung Electronics Vice Chairman Lee Jae-yong on the 4th in connection with the merger of Samsung C&T and Cheil Industries and allegations of Samsung's management succession, Samsung once again faces a crossroads of leadership vacancy after more than three years.

Vice Chairman Lee's side, through his legal team, expressed strong regret and could not hide their dismay. Just two days after Vice Chairman Lee applied to the prosecution for the convening of an investigative review committee, asking for an assessment of the validity of the indictment from a third-party perspective on the 2nd, the prosecution's sudden request for an arrest warrant also showed signs of surprise.

The prosecution plans to proceed with the investigative review committee process as scheduled, separate from the arrest warrant request. However, depending on whether Vice Chairman Lee is detained or indicted, Samsung's "management clock" is inevitably plunged once again into a fog where it is difficult to see even an inch ahead.

Vice Chairman Lee was detained in February 2017 in connection with the Park Geun-hye administration's state affairs manipulation case and was released after receiving a suspended sentence in the appellate trial in February 2018. Now, after two years and four months, he again stands at the crossroads of detention. Samsung's legal team issued a statement that day saying, "We cannot help but express strong regret."

The legal team said, "This investigation has been conducted with unprecedented intensity over a long period of one year and eight months, including about 50 search and seizure operations and more than 430 summons interviews of over 110 people. Despite the management crisis situation at Samsung Group, Vice Chairman Lee and Samsung have quietly accepted the prosecution's investigation and cooperated sincerely."

Regarding Vice Chairman Lee's application for the convening of the investigative review committee submitted to the prosecution the day before, the legal team explained, "At a point when the investigation was practically concluded, Vice Chairman Lee and others could not accept the criminal charges being formed by the prosecution and submitted a request to the Supreme Prosecutors' Office investigative review committee to review whether to continue the investigation and whether to indict from the public's perspective."

The legal team added, "While the Seoul Central District Prosecutors' Office Citizens' Committee's agenda review procedure has begun, the sudden request for an arrest warrant seems to undermine the legitimate right to seek expert review and objective judgment from the public's perspective, which is regrettable."

Furthermore, they said, "If the investigative review committee procedure, which is expected to be brief, had listened once to the grievances of the parties involved and made a decision after sufficient review by the committee members, the public might have trusted the prosecution's decision more, which is a regret we cannot help but express."

Samsung executives and employees, who had been struggling to prevent a leadership vacancy due to Vice Chairman Lee's re-incarceration, appear deeply disappointed by the ongoing judicial risk. Since early last month, when Vice Chairman Lee declared a public apology to break away from past mistakes and vowed to change, Samsung had been accelerating the 'New Samsung' initiative, raising concerns that if Vice Chairman Lee is detained again, normal management activities would become impossible.

After his release, Vice Chairman Lee expanded his domestic and international on-site management activities roughly once a month and recently showed even more aggressive moves. Despite the COVID-19 pandemic, he visited the semiconductor plant in Xi'an, China, and announced plans to build the Pyeongtaek foundry and NAND flash production lines worth about 20 trillion won, which are representative examples.

A CEO of a major corporation said, "In an already difficult environment, it is important to create an environment where our companies can demonstrate management capabilities, but looking at the Samsung case, it is hard to shake the feeling that the prosecution is conducting an excessive targeted investigation."

Initially, the legal community believed that the prosecution was unlikely to request an arrest warrant or make an indictment decision on its own until the investigative review committee discussions were completed. However, the prosecution requested the arrest warrant faster than expected.

The Economic Crime Criminal Division of the Seoul Central District Prosecutors' Office submitted a request for arrest warrants to the court on the morning of the same day for Vice Chairman Lee, former Samsung Future Strategy Office head (Vice Chairman) Choi Ji-sung, and former Future Strategy Office Strategy Team leader (President) Kim Jong-joong. Charges against Vice Chairman Lee and others include violations of the Capital Markets Act related to unfair trading and market manipulation, and violations of the External Audit Act for stock companies. Former President Kim faces additional charges of perjury.