Samsung chief to be released on parole Friday

Samsung Electronics Vice Chairman Lee Jae-yong shows up for a hearing in his appeal against a bribery conviction involving former President Park Geun-hye in this photo taken in January. The Ministry of Justice announced Monday Lee will be released on parole Friday. Korea Times file

By Yi Whan-woo

• Published Aug 9, 2021 9:27 PM KST
• Updated Aug 10, 2021 3:26 PM KST

Justice Minister Park could lift travel restrictions on Lee

By Yi Whan-woo, Kim Yoo-chul

Samsung Electronics Vice Chairman Lee Jae-yong will be released from prison on parole Friday, however, there are uncertainties as to his role at the country's largest conglomerate as he will not immediately be allowed to officially return to running the group.

“Samsung Electronics Vice Chairman Lee Jae-yong has been included on the parole list in consideration of the country's economic situation due to the continued pandemic, as well as the global economic environment,” the Ministry of Justice said in a briefing, Monday evening.

The ministry's nine-member parole commission approved of Lee's release, which Justice Minister Park Beom-kye later confirmed. “The ministry took into consideration the estimated economic impact of the continued COVID situation,” Park told reporters, in explaining the decision.

Lee has been in prison since January of this year after a guilty verdict on charges of bribery and embezzlement involving impeached and jailed former President Park Geun-hye back in 2017 was upheld by a high court.

In July, the ministry lowered its time-served regulation for parole eligibility from the previous 80 percent to 60 percent; with some sources familiar with the ministry saying the revision was solely intended to benefit Lee amid growing pressure from his advocates.

The Samsung chief has served more than 60 percent of his sentence so far, and under these circumstances, there have been repeated calls from business, religious and political leaders to free him through a presidential pardon. Several polls also showed the public in general were supportive of his release.

Given Lee's position as head of the family that owns Samsung, his release is expected to help the group fix and announce strategic investment decisions and future strategies for corporate sustainability, most of which have been put on hold as major decisions required his approval.

Although the ministry's move will ease investor concerns over a vacuum in the top conglomerate's leadership, his resumption of work as the group leader remains problematic.

Under Korean law, individuals found guilty of “economic crimes” are not allowed to return to positions of responsibility for five years following their release. In addition, people who have been paroled can't travel overseas.

Unfortunately for Samsung, the ministry has decided to enforce the five-year ban on Lee, but it's highly likely that Minister Park will allow him to make scheduled international business trips, as he has the authority to do so.

Samsung Electronics said it had no official comment on the parole decision, but company sources contacted by The Korea Times said Lee's release will accelerate group-wide efforts to ease uncertainty on pending issues.

The country's business circle, which has long been asking President Moon Jae-in to grant a presidential pardon for Lee in recognition of Samsung's “contribution to the national economy and its widened role in addressing global semiconductor shortages,” welcomed the decision.

“We welcome the parole decision allowing Samsung Electronics Vice Chairman Lee Jae-yong to freely proceed with tasks assigned. But it would have been much better if Lee returned to his duties through a presidential pardon. We expected government agencies to maintain greater flexibility in terms of easing restrictions placed on Lee related to economic activities such as meetings with Samsung's overseas partners,” Woo Tae-hee, vice chairman of the Korea Chamber of Commerce and Industry (KCCI), said. The KCCI is the country's top business lobby representing the interests of conglomerates.

Daunting tasks

The parole decision comes as Samsung Electronics is facing challenges in its core businesses ― chips and smartphones ― amid intensifying competition with its chief overseas rivals in each segment.

All of Samsung's key M&A decisions have been put on hold. Plus, it has yet to announce its massive semiconductor investment plan in the United States despite its commitment to the White House to invest billions of dollars to construct foundry lines, which is in accordance with the President Joe Biden administration's initiatives.

“Thanks to the parole, Samsung can now announce decisions on substantial large-scale investments into its semiconductor, batteries and automotive parts businesses,” said Kim Il-tae, a senior fund manager at Meritz Investment in Seoul.

In semiconductors, while Samsung is the long-time global leader in memory chips, because of market saturation, it is looking to invest more into the foundry-centric business, which is more profitable. Samsung's presence in the foundry chip business is meager, trailing behind sector leader TSMC of Taiwan, and it is reviewing an acquisition of, or investment in, NXP Semiconductor to boost its strength in logic-chip manufacturing.

Its smartphone business is also being pressured in terms of profits due to the continued rise of Chinese competitors such as Xiaomi, and so its mobile business is being reviewed internally so as to remain competitive

Samsung SDI, the group's battery arm, is planning to build a plant in the U.S. to ride on the growing demand for electric vehicles; however, this awaits confirmation.

“It appears key decisions have been put off because they are also diplomatically sensitive issues and ones that no other than business owners would be willing to risk,” said Shin Yul, a political science professor at Myongji University.