Samsung chief faces showdown with prosecution on Monday

Tech giant calls on court to make 'objective and reasonable' decision

By Kim Hyun-bin

Tensions are on the rise over the prosecution's request for an arrest warrant against Samsung Electronics Vice Chairman Lee Jae-yong, over allegations of Lee's involvement in 2015 in a controversial merger of two group affiliates, Samsung C&T and Cheil Industries.

A Seoul court will hold a hearing to decide whether to issue the warrant at 10:30 am today. If the warrant is approved, it will be the first time since 2017 that Lee will be arrested on criminal charges, which Samsung claims will trigger a leadership crisis in the nation's biggest conglomerate.

In a last-minute effort to save the Samsung heir, the group released a statement Sunday rebutting speculative local reports surrounding the case and calling on the court to make an “objective and reasonable” decision to normalize its management.

“The ongoing crisis is the one that Samsung has never been encountering before. The drawn-out investigation by the prosecution has been affecting management normalization, and to make matters worse, external uncertainties are growing due to the COVID-19 outbreak and renewed trade war between the U.S. and China,” it said.

“We hope that (the court) will pave the way for Samsung to normalize management and play a leading role in overcoming this crisis,” it added.

Samsung Electronics Vice Chairman Lee Jae-yong

On Thursday, the prosecution requested the courts to issue an arrest warrant for Lee and two of his close aides, which comes as a shock for Samsung as it came just two days after the company requested the prosecution form an outside committee of experts to review the ongoing probe and determine the validity of its potential indictment of them.

For the last 19 months, the company says it has been very cooperative with over 50 search and seizures of the company and 110 senior employees being summoned for questioning a total of 430 times. Despite the cooperation, if the court issues the warrant it could nullify Samsung's request for an outside expert review panel.

Samsung strongly denied its involvement in any illegalities in the merger of Samsung C&T and Cheil Industries.

“The Samsung C&T merger with Cheil Industries was legally formed abiding to related laws and regulations. Samsung BioLogics accounting also consented to the international accounting standards,” the group said.

However, prosecutors continued to accuse Lee of illegal trading, market price manipulation, and accounting fraud at Cheil's key affiliate Samsung BioLogics, which was seen as a move to facilitate Lee's managerial succession from his ailing father, Lee Kun-hee, by inflating the value of Cheil Industries and lowering that of Samsung C&T prior to the merger.

According to judicial circles, the prosecution has claimed to obtain a “smoking gun” of one of Samsung internal reports that seems to have listed a senior executive's discussion with Lee of a possible managerial succession.

The judicial review of the warrant is expected to be a fierce legal battle between the prosecution and Samsung, as a dismissal of the warrant could become a major blow to the prosecution, which has been investigating the case for 19 months, while the issuance will create another leadership vacuum at the country's leading conglomerate.

Business circles are crying foul against the prosecution's request for an arrest warrant, citing the country's Criminal Procedure Code, which allows issuance of an arrest warrant if the suspect has no housing or shows intent to flee or destroy evidence, which does not apply to Lee.

They also point out it is “questionable” to request the warrant after 50 search and seizures of the company in addition to 430 accounts of questioning of Samsung executives for the past 19 months, which would have garnered more than enough evidence to state their case.