Last-ditch effort to rescue Samsung heir

Samsung Electronics Vice Chairman Lee Jae-yong bows before a nationally televised apology over various company-involved wrongdoings at Samsung Seocho Tower, May 6. / Korea Times file

Despite prosecutors' arrest warrant request, Samsung plans to proceed with its plan to convene “citizen committee” regarding its heir case

By Baek Byung-yeul

A last-ditch effort to save Samsung leader Lee Jae-yong has hit a serious roadblock, after South Korean prosecutors sought an arrest warrant for the vice chairman over accounting fraud.

Lawyers defending Samsung in the ongoing court case released a statement strongly condemning the prosecutors' decision to seek an arrest warrant for the heir of the country's most powerful business group.

“Samsung Vice Chairman Lee and senior group executives involved in the alleged accounting fraud claims and other acts of wrongdoing were fully cooperative with the prosecutors over the last 20 months. Some 110 group executives were summoned 430 times. Samsung never complained about the prosecutors' probe despite growing business challenges. However, Thursday's decision by the prosecutors went too far,” said the statement Samsung's legal team shared with reporters.

The statement and the prosecutors' seeking of an arrest warrant came a day after Samsung requested the Seoul Central Prosecutors' Office to convene a citizen committee to judge the investigation regarding the merger between two Samsung units.

Given the external committee will determine whether prosecutors should continue with their investigation and whether Lee and other Samsung executives should be indicted, officials said Thursday that Lee's request for a citizen panel can be interpreted as his last resort to put an end to the four-year-long investigation.

Lee made his public apology over issues surrounding his succession plan that happened during the administration of Park Geun-hye, who was impeached. President Moon Jae-in visited Samsung factories “two times” and encouraged Lee to keep up Samsung's continued investment in OLEDs and EUVs, which the government identified as the country's new growth engines after Japan's decision to remove South Korea from its list of most trusted trading partners.

Last month, Lee visited Samsung Electronics' key semiconductor plant in Xian, China, becoming the first global businessman to visit there since the coronavirus erupted. He also has announced a series of investment plans for the company's plant in Pyeongtaek, Gyeonggi Province, including injecting around 10 trillion won to expand the company's contract-based chip manufacturing business and 9 trillion won for its flash memory chip business.

After the President made his first visit to Samsung's mobile factory in the northern Indian city of Noida in July 2018, he has visited two more Samsung plants including a chip-making plant in Hwaseong, Gyeonggi Province, in April 2019, and a display plant in Asan, South Chungcheong Province, in October. For Moon, who is required to maintain his neutrality instead of favoring a specific enterprise, it is a rare move for the President to visit the same company three times during his term.

Citing such efforts and conditions, there were some expectations that Lee would get some “political favor” in accordance with President Moon's drive to improve the domestic economy hit hard by COVID-19.

Despite the prosecutors' move, Samsung plans to continue its last-ditch effort to save Lee.

The 51-year-old heir and the company's executives have been under the prosecution's investigation for allegedly lowering the value of Samsung C&T and inflating Cheil Industries before their merger in 2015. At that time, Lee was the largest shareholder of Cheil Industries.

Prosecutors also suspected that the group's biopharmaceutical arm Samsung BioLogics intentionally committed accounting fraud to inflate the valuation of the biopharmaceutical arm and an affiliate of Cheil Industries in order to enhance Lee's control of the group. Lee has denied the charges.

The system was introduced in January 2018. The review committee, led by former Supreme Court Justice Yang Chang-soo, will determine whether prosecutors should continue with their investigation. The prosecution plans to convene the committee comprised of external experts as early as next week.

Industry officials added Samsung's call for a citizen panel to review the investigation has been made to avoid a leadership vacuum, amid growing uncertainties surrounding the business environment of the group.

“As uncertainties surrounding the group have continued, it seems Samsung Group has reached a conclusion to end the investigation by requesting to summon a citizen committee,” said a high-ranking industry official familiar with the matter.

The prosecution has investigated over 30 former and current group executives more than 100 times since 2018 to link Samsung BioLogics' accounting fraud case to the merger between Samsung C&T and Cheil Industries. The official added it is rare to see the prosecution continue an investigation for years.

Another industry official said Samsung's request to convene the citizen panel to review the validity of the investigation makes sense considering why the system was introduced in the first place. “The system was adopted in 2018 as prosecutors recognized themselves as a subject to be reviewed on a case that is of great public concern for the fairness of the judicial system,” the official said.

Samsung Electronics' Vice Chairman Lee Jae-yong arrives at Gimpo International Airport after visiting the company's chip plant in Xian, China, May 19. / Yonhap