[Independence Day Pardon] Lee Jae-yong Pardoned... 'Judicial Risks Still Remain'

Accounting Fraud and Unfair Merger Trial Separate from 'Gukjeongnongdan' Case
Prolonged Trial Expected... Weekly Witness Appearances Also Restrict Business Activities

Vice Chairman Lee Jae-yong of Samsung Electronics, who was reinstated through the special pardon on August 15 Liberation Day, is moving at the Seoul Central District Court in Seocho-gu, Seoul on the 12th. Photo by Kang Jin-hyeong aymsdream@

[Asia Economy Reporter Park Sun-mi] Although the management restrictions on Samsung Electronics Vice Chairman Lee Jae-yong have been lifted, judicial risks still exist due to trials surrounding allegations of unfair mergers within affiliates and accounting fraud. The reinstatement decided on the 12th only affects the confirmed verdict in the state corruption scandal, and since he must attend court hearings related to the unfair merger allegations every week, it is still considered not a ‘complete return to management.’

According to the Ministry of Justice and industry sources, the government announced on the day, "To overcome the economic crisis through economic revitalization, Vice Chairman Lee, who recently completed his sentence, is reinstated." Lotte Group Chairman Shin Dong-bin, who was on probation, received a special pardon and reinstatement, and Dongkuk Steel Chairman Jang Se-ju and former STX Group Chairman Kang Deok-soo were also included in the pardon list. At noon that day, in front of the Seoul Seocho District Court Complex, Lee told reporters asking about his reinstatement, "I will work hard for the national economy."

Accordingly, Samsung, which had faced difficulties due to the absence of its head, has been able to breathe a sigh of relief from ‘management risks.’ Lee was exempted from employment restrictions and is now free from any limitations on management activities. This is 69 months since the so-called ‘state corruption’ incident during the Park Geun-hye administration in November 2016.

However, the reinstatement only affects the state corruption case with a confirmed verdict. It is unrelated to the unfair merger and accounting fraud allegations involving Samsung Group affiliates, for which a separate indictment has been filed and the first trial is ongoing.

Separate from the state corruption case, an indictment was filed regarding the unfair merger allegations. Lee is accused of deliberately inflating the stock price of Cheil Industries and lowering that of Samsung C&T during their merger process to strengthen his group’s control.

This case was separately indicted in September 2020 while the retrial of the state corruption case was underway, and the first trial is still ongoing. Since the reinstatement only affects the confirmed verdict in the state corruption case, the court’s review of the unfair merger allegations continues.

In particular, Lee is expected to face restrictions on management activities as he must personally attend court hearings, which can be held up to twice a week, as a defendant. If found guilty in the unfair merger case, there is concern that employment restrictions and other limitations on management activities could be reinstated.

The presiding court, the Seoul Central District Court Criminal Division 25-2 (Presiding Judges Park Jeong-je, Park Sa-rang, and Park Jeong-gil), has scheduled court dates until January 13 of next year.