[Asia Economy Reporter Jeong Hyunjin] 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 affairs manipulation’ case and is currently incarcerated, appeared in court again on the 22nd after about three months. Lee’s legal team expressed gratitude for the postponement of the trial last month due to surgery for acute appendicitis but stated that they do not admit to the charges.
The Seoul Central District Court Criminal Division 25-2 (Presiding Judge Park Jeong-je) held a trial on this day for Lee and 10 Samsung affiliates on charges including unfair trading and market manipulation under the Capital Markets Act, and breach of trust. 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 by about a month after Lee was hospitalized for acute appendicitis.
Appeared in black suit without tie... Looked thinner after appendicitis surgery
Lee appeared in court wearing a black suit without a tie and a mask, looking thinner than before. It is known that he lost about 7 to 8 kg during his hospitalization. After greeting his legal team, he calmly faced the trial. During the trial, he mainly looked straight ahead and lowered his mask to drink water when the trial became lengthy.
Since Lee appeared in public for the first time in a while, the press was very eager, and the courtroom was filled with general audience members as well. An invisible tension flowed between the prosecution and the defense sitting opposite each other.
Right after the trial began, when the judge confirmed the defendant’s presence and called his name, Lee stood up and replied, "Yes." When the judge asked, "Is your occupation Vice Chairman of Samsung Electronics Co., Ltd.?" he again answered, "Yes." When asked if he wanted a jury trial, he said, "No."
Lee’s defense attorney said before the prosecution began explaining the charges in detail, "I would like to speak on behalf of the defendant. The court also considered the defendant’s urgent situation and postponed the trial date," adding, "Thanks to that, the defendant overcame the critical situation and is recovering." He also expressed gratitude to the prosecutor and said they would ensure the trial proceeds smoothly.
After the defense attorney presented a PowerPoint (PPT) stating that they deny all charges, when the court asked if Lee admitted the charges, he replied, "I cannot admit them." Following him, all defendants including former Chief Choi Ji-sung and former Deputy Director Jang Choong-ki also stated they do not admit the charges.
Prosecution: "The lies made during the merger process are problematic"
On the morning of the same day, the prosecution presented a PPT on the charges against the defendants for about two hours. The prosecution alleges that the Future Strategy Office illegally intervened by spreading false information to inflate the stock price of Cheil Industries and lower that of Samsung C&T during the 2015 merger to facilitate Lee’s succession of management rights. The prosecution said, "There were claims from the defense that the prosecution misunderstood and distorted the charges, so we will explain the purpose of the indictment clearly to avoid any misunderstanding by the court," and proceeded with an explanation of the charges.
The prosecution stated, "The defense claims that the prosecution assumes the merger purpose of succession and strengthening control is illegal and improper, but the issue is the provision of false information and withholding investment information during the merger process to achieve the succession goal." They added, "Lee’s side did not hide the merger purpose and said that the strengthening of control through the merger was publicly disclosed and known to everyone, but the problem is not the increase in Lee Jae-yong’s shareholding ratio but that it was disguised as a merger for business necessity."
They continued, "In reality, the defendants chose the timing favorable to Lee for his private gain, disregarding business effects," and said, "Externally, it was presented as a business necessity, and Samsung C&T and Cheil Industries decided on their own, selecting a timing favorable to shareholders, deceiving investors by promising huge synergy effects to complete the merger."
Defense: "Merger was sufficiently necessary for business... Considered shareholder interests"
In the afternoon, the defense presented their case with a PPT for over three hours. The defense said, "The indictment claims the merger was solely for succession and strengthening control, but the merger was sufficiently necessary for business," adding, "It also received positive evaluations for stabilizing Samsung C&T’s management," and "Management stabilization benefits not only the company but also shareholders."
The defense responded to the prosecution’s criticism of the merger timing by saying, "Stock price trends are difficult to predict. Using this as a major basis for criminal punishment is risky and unstable." They emphasized, "Ultimately, succession and strengthening control are the prosecution’s only interpretation of the facts in this case," and said, "They claim the business necessity for a new breakthrough is a false pretext, but please prove why it is a false pretext. This is a matter of proof, not declaration."
Furthermore, the defense said regarding the Future Strategy Office’s review of the merger, "The merger process was carried out according to decisions by the merging companies and their boards, with sufficient consideration of the interests of both companies and shareholders," and "There is a misunderstanding that the Future Strategy Office set the merger ratio and timing disadvantageously for Samsung C&T shareholders to benefit major shareholders, but as long as the merger ratio and timing were not disadvantageous to Samsung C&T shareholders, the Future Strategy Office’s review is not problematic."
The trial, which began at 10 a.m., ended around 6:30 p.m. The court decided to summon Han Mo, a former Samsung Securities corporate finance employee known to have been involved in the Samsung C&T and Cheil Industries merger, as a witness at the next trial on May 6.
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