Prosecution Seeks 5-Year Prison Sentence for Lee Jae-yong, Citing "Undermining the Foundation of the Capital Market"

Prosecutors: "Chaebol Corporate Restructuring Will Serve as a Benchmark for Accounting Treatment Direction"

In the appeal trial of Samsung Electronics Chairman Lee Jae-yong, who was indicted on charges of the ‘unfair merger’ between Samsung C&T and Cheil Industries, the prosecution demanded a five-year prison sentence. The appeal verdict is expected to be delivered between late January and early February next year.

On the 25th, at the second trial sentencing hearing presided over by the Seoul High Court Criminal Division 13 (Chief Judge Baek Gang-jin), the prosecution requested five years in prison and a fine of 500 million won. In the first trial held in February, he was acquitted.

The prosecution also requested that the defendants indicted alongside Chairman Lee be sentenced to the same terms as those sought in the first trial. In the first trial, the prosecution demanded four years and six months in prison and a fine of 500 million won for former Future Strategy Office head Choi Ji-sung and former Strategy Team leader Kim Jong-joong. For former Future Strategy Office deputy head Jang Choong-ki, the prosecution sought three years in prison and a fine of 100 million won.

Samsung Electronics Chairman Lee Jae-yong is entering the Seoul High Court building on the 25th to attend the appellate trial's final hearing regarding the allegations of unfair merger between Samsung C&T and Cheil Industries. Photo by Heo Young-han

The prosecution stated, “This case involves the defendants undermining the foundation of the capital market to secure the succession of the group’s head,” adding, “Ultimately, what the defendants damaged are the constitutional values that form the basis of our economy’s justice and the capital market.” They further said, “This ruling will serve as a benchmark for restructuring conglomerate companies and accounting practices,” and warned, “If the defendants are acquitted, controlling shareholders will have no hesitation in using illegal and irregular methods to push mergers in directions that suit their interests.” They added, “We hope this will be an opportunity for the capital market to take a step forward toward transparency and fairness,” and requested, “Please overturn the original ruling and convict all defendants based on the facts in accordance with law and principles.”

Chairman Lee was indicted in September 2020 on charges including illegal involvement in the merger process between Samsung C&T and Cheil Industries conducted in 2015 to succeed management rights and strengthen Samsung Group’s control. The prosecution suspects that Samsung Group prepared Lee’s succession plan in advance, focusing on a document called ‘Project G,’ and accordingly executed the merger between Cheil Industries and Samsung C&T in a way favorable to Lee. During the merger phase, they believe the company led illegal acts such as spreading false information, concealing important information, buying major shareholders, illegal lobbying to secure the National Pension Service’s voting rights, and market manipulation through concentrated stock purchases.

However, in February, the first trial acquitted Chairman Lee and all current and former Samsung Electronics executives of all 19 charges. The prosecution appealed this verdict. They also amended the indictment to reflect the first trial ruling in a related administrative lawsuit that partially acknowledged the accounting fraud charges related to Samsung BioLogics.