Lee Jae-yong also faces his 'Day of Destiny'... Second legal judgment today

Unfair Merger between Samsung C&T and Cheil Industries
Allegations of Accounting Fraud at Samsung BioLogics
Appellate Court Sentencing Hearing at 2 p.m. on the 3rd

Samsung Electronics Chairman Lee Jae-yong will face the second legal judgment on the allegations of the 'unfair merger between Samsung C&T and Cheil Industries' and 'accounting fraud at Samsung BioLogics' on the 3rd.

The Seoul High Court Criminal Division 13 (Presiding Judges Baek Gang-jin, Kim Seon-hee, and Lee In-su) will hold the second trial sentencing hearing for Chairman Lee at 2 p.m. on the same day. It is reported that Chairman Lee will work in his office at the Seocho building in the morning and then move to the court in time for the hearing.

This case is the last 'judicial risk' tying Chairman Lee's hands. If the second trial acquits him of all 19 charges, he will effectively overcome the major hurdle toward resolving his judicial risks.

Even if the case proceeds to the Supreme Court appeal, the facts of the case are finalized in the second trial, and the Supreme Court will not review them. The Supreme Court conducts legal review without re-examining the facts. It only examines whether the second trial's ruling has any legal issues under Korean law.

The prosecution judged that Chairman Lee, former Samsung Group Future Strategy Office chief Choi Ji-sung, former Future Strategy Office Strategy Team leader Kim Jong-jung, and other Samsung Group executives were involved in various fraudulent transactions, market manipulation, and accounting fraud during the 2015 merger of Cheil Industries and Samsung C&T to stably succeed management rights at minimal cost and strengthen control within the group. They were indicted in September 2020. On February 5 last year, the first trial acquitted Chairman Lee of all 19 charges.

In the second trial, initiated by the prosecution's appeal, both sides added evidence and amended indictments, engaging in intense legal battles. At the sentencing hearing on November 25 last year, the prosecution requested a five-year prison sentence and a fine of 500 million won for Chairman Lee. Chairman Lee, given the opportunity for a final statement, appealed to the court, saying, "Since the first trial's acquittal, I have felt a heavy responsibility," and "Please give me a chance to overcome this crisis and transform Samsung into a company loved by the people."

Business Community and Samsung: "Part of Management Strategy to Discover Future Growth Engines"

While the prosecution and Chairman Lee's side sharply disagreed in court, many in the business community evaluate that the foundation of this case was "Samsung Group's efforts to discover future growth businesses." The merger between Cheil Industries, the parent company of Samsung BioLogics, and Samsung C&T, as well as the accounting treatment of Samsung BioLogics, are seen as preparatory steps to increase the affiliate's influence in the bio market. The argument is that this was not for Chairman Lee's personal gain but a series of processes conducted with the company's interests in mind.

According to business insiders, around 2015, Samsung Group anticipated that leveraging its world-class semiconductor process technology would demonstrate its true value in the bio business and sought to enter the market. Internally, there was an analysis that applying the group's precise and meticulous semiconductor process technology to the bio business would enable them to produce new drugs better than anyone else by receiving orders from global pharmaceutical companies.

Chairman Lee reportedly agreed with this judgment and spared no company-wide support for Samsung BioLogics and related affiliates. It is also reported that Chairman Lee and Samsung actively explained this background in court and claimed innocence. Former chief Choi argued, "At the time of the incident, it was like being watched in a transparent fishbowl; it was unimaginable to organize illegal activities."

Samsung Electronics Chairman Lee Jae-yong is entering the courthouse to attend the continuation of the second trial related to Samsung's unfair merger charges held at the Seoul High Court on the 11th.

Prosecution: "Overstated Company Value to Succeed Management Rights"

The prosecution, suspicious of the merger, accounting treatment, and market price changes, concluded after investigation that these were efforts to overstate the company's value to succeed management rights and strongly asserted this in the second trial. They submitted about 2,300 additional pieces of evidence and amended the indictment by adding the Seoul Administrative Court's ruling from last August.

Previously, the Seoul Administrative Court judged that Samsung BioLogics' 2015 accounting treatment of losing control over Samsung Bioepis was done "primarily to avoid issues such as capital erosion, without any reasonable grounds," violating accounting standards.

This conclusion differs from the first trial court's ruling, which found Samsung BioLogics' loss of control accounting appropriate and no accounting fraud. The prosecution also appealed to the court that electronic information seized from Samsung BioLogics' servers during the investigation was lawfully collected. The first trial did not recognize the evidentiary value of this key evidence because it was obtained without a selective procedure. This was identified as the 'decisive blow' leading to Chairman Lee's acquittal in the first trial and is regarded as a critical variable that could significantly influence the second trial's judgment.