Lee Jae-yong Appears Gaunt at Court... Samsung 'Merger Allegations' Trial Resumes

Lee Chung-soo Appendicitis Surgery Delays Trial by One Month
Back in Court After 3 Months Since National Scandal Retrial
Prosecutors vs Defense, Fierce Legal Battle
Lee Pardon Debate Spreads Amid Global Semiconductor Hegemony War Heating Up

Vice Chairman Lee Jae-yong of Samsung Electronics attending the sentencing hearing of the retrial for the state affairs manipulation case held last January. On that day, the court sentenced Vice Chairman Lee to 2 years and 6 months in prison and ordered the confiscation of the racehorse "Lausing." Lee, who had been on trial without detention, was arrested in the courtroom after a warrant was issued that day. [Image source=Yonhap News]

[Asia Economy Reporters Woo Su-yeon and Jung Hyun-jin] On the morning of the 22nd, at courtroom 417 in the West Building of the Seoul Central District Court, Lee Jae-yong, Vice Chairman of Samsung Electronics, who was sentenced to 2 years and 6 months in prison in the retrial of the state corruption scandal case last January and is currently incarcerated, appeared in court again after about three months.

Wearing a black suit without a tie, Lee entered the courtroom looking thinner than before. After greeting his legal team, he calmly faced the trial. As Lee appeared in an official setting for the first time in a while, the media's enthusiasm was intense, and the courtroom was filled with not only reporters but also general public attendees. An invisible tension flowed between the prosecution and the defense team sitting opposite each other.

On this day, the Criminal Division 25-2 of the Seoul Central District Court (Presiding Judges Park Jeong-je, Park Sa-rang, and Kwon Seong-su) held a trial for Lee and 10 Samsung affiliates on charges including unfair trading and market manipulation under the Capital Markets Act, and breach of duty. The first trial related to the Samsung Group merger and accounting fraud allegations was originally scheduled for the 25th of last month but was postponed for about a month after Lee was hospitalized with acute appendicitis last month.

◆Prosecution vs Defense, Fierce Legal Battle= During the preparatory hearing in March, the prosecution and defense showed sharp confrontation, and they continued their intense legal battle on this day as well. The prosecution claimed that during the Samsung C&T-Cheil Industries merger process, Samsung adjusted the merger ratio and timing in favor of Lee’s side. They maintained their previous argument that the merger was executed at a time when the stock price of Cheil Industries, where Lee held a high stake, was elevated, and the stock price of the old Samsung C&T was lowered, maximizing the controlling shareholder’s power.

On the other hand, the defense pointed out that it is contradictory to discuss overvaluation or undervaluation of stocks for two companies in different industries (Cheil Industries and old Samsung C&T). They also argued that since the old Samsung C&T, based on construction, was facing a downturn in the industry, the stock price could have further declined, so delaying the merger timing would not have resulted in a merger ratio favorable to the old Samsung C&T shareholders.

The accounting issues of Samsung Bioepis are also a highly contentious area with divided expert opinions, and the prosecution’s claim that the Nasdaq listing plan of Bioepis was a false fact is countered by the defense, who argue that it was a strategy that was practically implemented until just before its final withdrawal.

◆Global Semiconductor War Intensifies... Lee’s Pardon Theory Also Circulates= Lee has been imprisoned for three months after being sentenced to prison in the retrial of the state corruption scandal in January. With the four-year-long state corruption trial concluded and Lee serving his sentence, the trial regarding the Samsung Group merger allegations has begun, and he once again stands in court as a defendant.

Meanwhile, recently, calls for Lee’s pardon have been emerging across society, including the business community, religious circles, and political sectors. The argument is that amid the U.S.-China trade conflict escalating into a semiconductor hegemony war, there is a lack of a heavyweight private sector figure who can serve as a focal point for South Korea’s semiconductor industry.

The first person to mention the pardon was Sohn Kyung-shik, Chairman of the Korea Employers Federation. He said, "We do not know when Korea might lose its status as a semiconductor powerhouse," and mentioned that he proposed Lee’s pardon during a meeting with Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki on the 16th. Deputy Prime Minister Hong said he conveyed this to relevant agencies, but Park Beom-gye, Minister of Justice, who is the head of the relevant ministry, drew a line by stating that he has never considered pardon or parole.