Samsung Chairman Jay Y. Lee Cleared of Fraud and Stock Manipulation Charges
A Seoul appeals court has acquitted Samsung Electronics Chairman Jay Y. Lee of accounting fraud and stock manipulation charges related to a 2015 merger, marking a significant legal victory for the business leader.
The Seoul High Court upheld an earlier ruling that dismissed allegations that the merger of Samsung C&T and Cheil Industries was orchestrated to solidify Lee’s control over the conglomerate. Prosecutors had sought a five-year prison sentence, arguing that financial statements were manipulated to justify the deal.
Lee, who has faced legal battles for nearly a decade, left the court without making a statement but had previously denied any wrongdoing, stating in court: “I never intended to deceive or damage investors for personal gain.”
Prosecution’s Claims Rejected
Prosecutors argued that Samsung BioLogics, an affiliate of Cheil Industries, engaged in accounting violations to inflate its assets and justify the merger. While the court acknowledged “inappropriate acts” in BioLogics’ financial reporting, it ruled that the company’s accounting decisions were based on rational financial reasoning rather than fraudulent intent.
The court also rejected claims that the merger caused financial losses to Samsung C&T shareholders, a key argument in the case. It remains uncertain whether prosecutors will escalate the case to South Korea’s Supreme Court.
Impact on Samsung and Lee’s Leadership
The ruling could remove a long-standing legal cloud over Lee, allowing him to fully focus on steering Samsung through intensifying competition in the tech industry. However, his leadership abilities are now under scrutiny as Samsung struggles to keep pace with AI chip demand and has lost ground to rivals like SK Hynix in supplying high-bandwidth memory (HBM) chips for Nvidia’s AI processors.
Samsung shares closed down 2.7% following the ruling.
Controversy Surrounding the Merger
The merger remains a contentious issue, with critics accusing Lee of prioritizing family control over shareholder interests. Civic groups, such as the People’s Solidarity for Participatory Democracy, condemned the ruling, arguing that South Korean courts continue to show leniency toward powerful business figures.
The National Pension Service, once the largest shareholder in Samsung C&T, has also sued Lee, seeking damages over what it claims was an undervaluation of the company’s assets. In 2023, the South Korean government was ordered to pay $108.5 million to U.S. hedge fund Elliott, which had challenged the pension fund’s role in approving the merger.
Lee previously served 18 months in jail on bribery charges before being released in 2021. He was later pardoned in 2022 by then-President Yoon Suk Yeol, who cited Samsung’s importance in overcoming South Korea’s economic challenges.
With the legal case now behind him, Lee faces growing pressure to demonstrate his leadership and navigate Samsung through shifting market dynamics in the global tech industry.
