'Management Succession Trial' May Start as Early as Next Month... Continuing Samsung Judicial Risks

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Although Samsung Electronics Vice Chairman Lee Jae-yong was sentenced to 2 years and 6 months in prison in the retrial of the state affairs manipulation case and was re-incarcerated, the judicial risk is expected to weigh on Samsung and Vice Chairman Lee for 4 to 5 years as the trial on management succession begins. The business community refers to Samsung's judicial risk as the "Lost Decade."

According to the business and legal circles on the 19th, the court plans to hold the second pretrial hearing on Vice Chairman Lee's management succession allegations as early as next month. Earlier, the Seoul Central District Court Criminal Division 25-2 (Presiding Judges Lim Jeong-yeop, Kwon Seong-su, Kim Seon-hee) scheduled a pretrial hearing on the illegal management succession allegations on the 14th of this month but canceled it due to the impact of the novel coronavirus disease (COVID-19).

The legal and business communities consider the state affairs manipulation trial, which began in 2017, to be virtually concluded. However, since the trial related to management succession involves intense disputes between the prosecution and Vice Chairman Lee and considering the gravity of the charges, it is expected to take at least 4 to 5 years until a final ruling by the Supreme Court.

In September last year, the prosecution indicted 11 people, including Vice Chairman Lee, former Future Strategy Office Director Choi Ji-sung, former Deputy Director Jang Chung-gi, and former Strategy Team Leader Kim Jong-jung, without detention on charges such as unfair trading under the Monopoly Regulation and Fair Trade Act, market manipulation, and breach of duty. The prosecution believes that Samsung's Future Strategy Office planned the illegal merger of Samsung C&T and Cheil Industries in 2015 to ensure Vice Chairman Lee's stable management succession. Additionally, Vice Chairman Lee was charged with violating the External Audit Act in connection with the Samsung BioLogics accounting fraud allegations.

However, Vice Chairman Lee's side maintains that "the merger was a legitimate business activity necessary for management" and denies the charges. The court also dismissed the prosecution's request for an arrest warrant for Vice Chairman Lee. Subsequently, the Supreme Prosecutors' Office's Prosecutorial Investigation Committee recommended non-prosecution of Vice Chairman Lee.

It is widely expected that it will take about 1 year and 6 months to 2 years, which corresponds to Vice Chairman Lee's incarceration period, for the first trial result to come out. If Vice Chairman Lee is sentenced to imprisonment while incarcerated, the incarceration period will be extended. A business community official expressed concern, saying, "Vice Chairman Lee's re-incarceration and the management succession trial have made Samsung's lost decade a reality."

Samsung is currently embroiled not only in the management succession trial but also in other lawsuits. The court is currently handling appeals related to the Samsung Electronics Service union dissolution case, the Everland union dissolution case, administrative lawsuits concerning Samsung BioLogics, appeals on evidence destruction in the Samsung BioLogics accounting fraud case, and stock purchase price lawsuits related to the Samsung C&T merger.