Samsung Heaves a Sigh of Relief
By Kim Tong-hyung
Staff Reporter
After 13 years of carefully managing a court battle involving its founding family, the Samsung Group is finally feeling it can focus entirely on running its business empire once again.
Samsung, South Korea's largest conglomerate, had an 800-pound gorilla lifted off its back Friday when the Seoul High Court let the group's former chairman Lee Kun-hee walk on a suspended sentence.
The 67-year-old was indicted last year for causing losses at Samsung SDS through illegal bonds sales in 1999 in a scheme to transfer control of Samsung to his son, Lee Jae-yong, now a senior executive of Samsung Electronics.
Apparently, not a soul in Samsung's towering corporate complex in southern Seoul believed that the elder Lee would avoid conviction. The country's Supreme Court sent the Samsung SDS case back to the High Court in May, rejecting an earlier ruling that found Lee not guilty, dashing any hopes for an acquittal this time around.
So the suspended three-year jail term and 110-billion-won (about $89 million) fine was not a result the suits at Samsung headquarters could complain too much about. Lee has one week to appeal the verdict to the Supreme Court, but it is uncertain whether he will decide to do so.
Lee stepped down as the chairman of the Korean industrial giant after being indicted for his involvement in the Samsung SDS case. Samsung made no official comment on the high court's decision.
``We have nothing to say about the verdict, and we don't know for now whether there will be an appeal,'' said a Samsung official.
Although no Samsung official would flatly say as such, the suspended sentence imposed on Lee virtually marks the end of the lengthy legal battles that have troubled Samsung in the past decade.
Now, all eyes are on Jae-yong and his first-class ticket to the top of Samsung's management helm. Jae-yong, Lee's only son, is currently being groomed for the throne as the senior vice president of the group's crown jewel, Samsung Electronics.
With no legal controversy to hold him back, industry watchers believe that Jae-yong's coronation could be put on fast-track, which may bring major changes to the Samsung corporate structure in the next three to four years.
Since the elder Lee stepped down, Samsung has adjusted its corporate governance structure, dismantling its ``strategy planning department'' that acted as the control tower of the group's corporate empire, and improved the independent management of its subsidiaries.
However, many see the current structure as an in-between system until Jae-yong earns his stripes as the group's top decision-maker.
The elder Lee, credited for Samsung ascent to become one of the most profitable companies in Asia, has been known for his assertiveness and bold strategies. Apparently, a similar brand of leadership is expected from his son, who will eventually get the right type of organization to wield such power.
``Jae-yong needs to prove his ability. If he doesn't, he won't be inheriting (the group),'' Lee said last year.
End of Troubles?
Lee unlawfully transferring Samsung's corporate wealth to his family exploded into a national scandal in 2000, when a group of law experts exposed him and other executives for maneuvering an illicit convertible bond sale in 1996 that handed Jae-yong control at Samsung Everland, the group's de facto holding company.
A criminal investigation followed, with the prosecution indicting two Samsung executives, former Everland CEOs Her Tae-hak and Park Ro-bin, in 2003, both men eventually getting suspended jail sentences.
It seemed that Lee had managed to escape the heat, but not for long. In a surprise news conference in 2007, whistle-blower Kim Yong-chul, Samsung's former top legal affairs officer, alleged that Lee had employed a slush fund and bribed prosecutors and government officials in exchange for silence on the murky Everland dealings. This led to an investigation by a special prosecutor, and eventually, Lee's resignation.
Ending years of debate, the Supreme Court upheld a lower court's not-guilty verdict on the breach-of-trust case involving Samsung Everland.
The Samsung SDS case was the other part of Samsung's legal troubles. In Friday's decision, the High Court ruled that Lee cost Samsung SDS about 22.7 billion won (about $18 million) in losses by managing the sales of the company's convertible bonds that were sold at artificially lower prices. This makes Lee guilty, the court said, since a loss of more than 5 billion won in a breach-of-duty case carries a statute of limitation of 10 years.
In an earlier ruling last year, before it was rejected by the Supreme Court, the Seoul Central District Court had acquitted Lee on the grounds that the statue of limitations had expired, ruling that the illegal bond sales cost Samsung SDS 4.4 billion won.