U.S. Markets closed

Billionaire Samsung Heir Endures Lecture From Judge in Bribery Trial

Sohee Kim
1 / 2

Billionaire Samsung Heir Endures Lecture From Judge in Bribery Trial

(Bloomberg) -- Samsung Electronics Co. heir Jay Y. Lee returned to court Friday to answer bribery charges that could land him in jail, only to sit through a lecture about how he can better run Korea’s largest company.

Lee should study how U.S. companies establish systems to prevent crime and take inspiration from how Israeli businesses drive innovation through reform, said Chung June Young, the judge presiding over the case. The heir apparent to the world’s largest maker of smartphones and chips listened attentively but didn’t take the stand. Dressed in a somber black suit with a gray tie, the tech mogul leaned toward the podium as the judge delivered his comments to a packed courtroom in Seoul.

Three years after explosive allegations of graft and corruption brought down the government of Asia’s fourth-largest economy, South Korea’s chaebol culture has again come under the microscope. The retrial of Korea’s best-known billionaire over expanded corruption charges reboots a landmark case that led to the impeachment of then-president Park Geun-hye and inflamed popular anger over the power of Korean conglomerates, also known as chaebols. The charges, which Samsung and Lee have previously denied, threaten to potentially throw Lee back in jail.

“If only Samsung’s internal compliance system was such that even the company’s leader would fear it, then not only the defendant but also President Park and Choi Seo-won could not have thought of the crime,” the judge said, referring to a confidante of Park’s who became central to the case. “As the head of a company representing our country, I hope you will feel responsible and humbly accept the results of this trial.”

The latest chapter in the legal drama is kicking off at a sensitive time for the half-century-old tech behemoth. Samsung is confronting heightened uncertainty from a lingering trade war between the U.S. and China as well as a spat between South Korea and Japan, both of which complicate its outlook and supply chain. A rising tide of technology like fifth-generation mobile networks and artificial intelligence is also opening up new opportunities for eager Chinese rivals, who are spending lavishly to catch up to Samsung and its cash-cow businesses of semiconductor and display manufacturing.

Read more: The Never-Ending Trial Between a Billionaire Heir and His Nation

The judge at times waxed lyrical in his exposition on Friday. In his closing remarks, Chung invoked the company’s 1993 Frankfurt Declaration crafted by Lee’s father, then-Samsung chairman Lee Kun-hee. The elder Lee’s blueprint to transform Samsung from a lowly cellphone maker into an industry leader is now studied in business classes across the country.

“In 1993, then 51-year-old Lee Kun-hee declared he would abandon all outdated and flawed practices, then overcame crisis through innovation,” the judge said. “In 2019, what declaration should Lee Jae-yong make, at the age of 51?”

Hearings will now get going in earnest. The appeals court that decided to release Lee in 2018 from jail, where he’d spent about a year after his initial arrest, will decide his final sentence over the course of the next few months. Prosecutors and Lee’s attorneys will fight over whether there was a succession plan in place for Samsung -- a key point that prosecutors say was a motivation behind the alleged bribes. Lee’s lawyer said he will mainly focus on the extent of defendants’ sentences.

Unless new evidence emerges during the retrial, the appeals court is expected to rule in line with the decision of Korea’s Supreme Court, which found that Lee had used three horses and additional funds, via an intermediary, to bribe President Park while seeking political support for his succession as Samsung chief. This would mean altering Lee’s presently suspended prison sentence.

The total amount of alleged bribery determined by the top court, including all three equines, carries a minimum sentence of five years, which cannot be suspended in the same way that Lee’s existing sentence has been. Media coverage in Korea, however, has centered on Article 53 of the Korean Criminal Act, which stipulates there could be a discretionary mitigation of the punishment “when there are extenuating circumstances.” In Lee’s case, the damage to Samsung -- crucial as it is to Korea’s economy -- could be presented as grounds to keep him out of prison.

Even in the event of an unfavorable ruling, the 51-year-old Samsung scion would still be able to appeal to the Supreme Court one more time, which could take another year. To avoid such a protracted legal battle, people in and out of Samsung have expressed hope that the court may reduce the punishment and slash the sentence to a suspended 30-month term.

Read more: Why the Fate of Samsung’s Billionaire Heir Turns on Horses

(Updates with judge’s comments from the sixth paragraph)

To contact the reporter on this story: Sohee Kim in Seoul at skim847@bloomberg.net

To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, ;Peter Pae at ppae1@bloomberg.net, Colum Murphy

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.