Jay Y. Lee, the de facto leader of Samsung Electronics, is facing a potential five-year prison sentence and a fine of $375,000 due to charges related to a 2015 merger between two of the company’s subsidiaries. South Korean prosecutors have long pursued Lee, alleging that the merger was manipulated to help him solidify his control over Samsung Electronics after the health crisis of his father, Lee Kun-hee.
The prosecution claims that Lee, along with 13 other Samsung executives, artificially inflated stock prices and engaged in accounting fraud during the merger. This illegal manipulation of Samsung’s subsidiaries—Cheil Industries and Samsung C&T—was reportedly aimed at ensuring that Lee would take leadership of Samsung, which was set to be handed down following his father’s incapacitation in 2014. Lee, however, has consistently denied the allegations, asserting that the merger followed standard corporate procedures and that he did not personally benefit from it.
This case is part of a broader effort by South Korean authorities to rein in corporate misconduct and address structural issues within the country’s family-run conglomerates, known as chaebols. The merger itself was valued at $8 billion, and prosecutors argue that it involved fraudulent accounting practices that harmed shareholders, particularly those of Samsung C&T. Additionally, the case ties into an earlier conviction against Lee for bribing former South Korean President Park Geun-hye, which had previously led to his 18-month jail sentence in 2017. This conviction was later reduced and suspended on appeal, but the issue resurfaced with this more recent case regarding the 2015 merger.
Samsung, on the other hand, has been dealing with the financial consequences of the legal case. While it has seen an increase in profits, the controversy surrounding Lee’s leadership and the merger continues to raise questions about the company’s long-term prospects and potential leadership changes. Lee’s fate could set a precedent for how corporate fraud cases are handled in South Korea’s highly scrutinised business environment.
A final ruling is expected in the coming months, with the court scheduled to deliver its verdict between January and February 2025.
