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Lee Jae-yong, Samsung Heir, Is Arrested on Bribery Charges Lee Jae-yong, Samsung Heir, Is Arrested on Bribery Charges
(about 2 hours later)
SEOUL, South Korea — The de facto leader of Samsung, Lee Jae-yong, was arrested Friday on bribery charges, a dramatic turn in South Korea’s decades-old struggle to end collusive ties between the government and powerful family-controlled conglomerates.SEOUL, South Korea — The de facto leader of Samsung, Lee Jae-yong, was arrested Friday on bribery charges, a dramatic turn in South Korea’s decades-old struggle to end collusive ties between the government and powerful family-controlled conglomerates.
Mr. Lee, the vice chairman of Samsung, one of the world’s largest conglomerates, was taken to a jail outside Seoul, the capital, soon after a judge at the Seoul Central District Court issued an arrest warrant early Friday. Mr. Lee, Samsung’s vice chairman, was taken to a jail outside Seoul, the capital, soon after a judge at the Seoul Central District Court issued an arrest warrant early Friday.
Mr. Lee, 48, was accused of paying $36 million in bribes to President Park Geun-hye’s secretive confidante, Choi Soon-sil, in return for political favors from Ms. Park, like government support for a merger of two Samsung affiliates in 2015 that helped Mr. Lee inherit corporate control from his incapacitated father, Chairman Lee Kun-hee. He is accused of paying $36 million in bribes to President Park Geun-hye’s secretive confidante, Choi Soon-sil, in return for political favors. Those are alleged to include government support for a merger of two Samsung affiliates in 2015 that helped Mr. Lee, 48, inherit corporate control from his incapacitated father, Lee Kun-hee, the chairman.
Mr. Lee is the first head of Samsung, a symbol of power and wealth in South Korea, to be arrested on corruption charges. Other charges against him include embezzlement, illegal transfer of property abroad and committing perjury during a parliamentary hearing. Samsung, whose market capitalization accounts for one-fourth of the value of all listed companies in South Korea, is a potent national symbol of power, wealth and technological innovation. Mr. Lee is the first head of the conglomerate ever to be arrested on corruption charges. Other charges against him include embezzlement, illegal transfer of property abroad and committing perjury during a parliamentary hearing.
Analysts say his case is a litmus test of whether the country’s relatively youthful democracy and judicial system are ready to crack down on the white-collar crimes of family-owned conglomerates, or chaebol, among which Samsung is the biggest and most profitable. Analysts say his case is a test of whether the country’s relatively youthful democracy and judicial system are ready to crack down on the white-collar crimes of family-owned conglomerates, or chaebol, among which Samsung is the biggest and most profitable.
His arrest is also a hard-won victory for the special prosecutor, Park Young-soo, who has been struggling to establish a bribery case against Mr. Lee and Ms. Park. Mr. Lee, who has not been convicted of any crime, is also the most prominent businessman to be ensnared in the special prosecutor’s broadening investigation into a corruption scandal that led Parliament to vote to impeach Ms. Park in December.
Ms. Park’s presidential powers remain suspended, and the Constitutional Court is expected to rule in the coming weeks on whether she should be reinstated or formally removed from office.
South Koreans have grown increasingly fed up with corruption scandals. When huge crowds took to the streets in recent months to demand Ms. Park’s impeachment, they also called for the arrest of Mr. Lee and other chaebol leaders.
All presidents, including Ms. Park, have entered office vowing to end favoritism and collusion with the chaebol, but they all later backtracked, arguing that the corporate titans were too important to the national economy to be arrested or given long sentences.
While Mr. Lee’s arrest was welcome news to many in South Korea, some fear that even if he is convicted he will be pardoned.
The arrest is a hard-won victory for the special prosecutor, Park Young-soo, who has been struggling to establish a bribery case against Mr. Lee and Ms. Park.
Mr. Lee, who also goes by the name Jay Y. Lee in the West, had survived the prosecutor’s first attempt to arrest him last month, when a court in Seoul ruled that there was not enough evidence of bribery. But investigators have since collected what they called more incriminating evidence and again asked the court for an arrest warrant.Mr. Lee, who also goes by the name Jay Y. Lee in the West, had survived the prosecutor’s first attempt to arrest him last month, when a court in Seoul ruled that there was not enough evidence of bribery. But investigators have since collected what they called more incriminating evidence and again asked the court for an arrest warrant.
“Given the newly presented criminal charges and the additional evidence collected, the legal grounds and need for arresting him are recognized,” the judge, Han Jeong-seok, said on Friday, issuing the arrest warrant. “Given the newly presented criminal charges and the additional evidence collected, the legal grounds and need for arresting him are recognized,” the judge, Han Jeong-seok, said Friday when he issued the arrest warrant.
Mr. Lee, who has yet to be convicted of any crime, was the most prominent businessman to be ensnared in the special prosecutor’s broadening investigation into a corruption scandal that led to Ms. Park’s impeachment by Parliament on Dec. 9. Ms. Park’s presidential powers remained suspended, with the Constitutional Court expected to rule in coming weeks whether she should be reinstated or formally removed from office. The prosecutor must indict Mr. Lee within 20 days.
Mr. Lee’s arrest was sensational news in South Korea, where business tycoons have seldom spent much time behind bars, even after they were convicted of white-collar crimes. In a statement, Samsung said, “We will do our best to ensure that the truth is revealed in the court proceedings.”
“Samsung has not paid bribes nor made improper requests to the President seeking favors,” the company said in a statement. “We will do our best to ensure that the truth is revealed in the court proceedings.” The prosecutor is preparing to bring bribery charges against Ms. Park as well, although she cannot be indicted while she is in office. If she is removed and indicted, she will be the first South Korean leader on trial for corruption since two military dictators, Chun Doo-hwan and Roh Tae-woo, were convicted of bribery in the mid-1990s.
Samsung was the most generous among a handful of conglomerates that each contributed millions of dollars to two foundations controlled by Ms. Choi, the president’s confidante, or signed lucrative contracts with companies run by Ms. Choi or her associates.
In November, state prosecutors indicted Ms. Choi on extortion charges, saying she leveraged her connections with Ms. Park to coerce Samsung and others.
They identified Ms. Park as an accomplice, but they brought no charges against the businesses, which they saw as victims of extortion. But the special prosecutor, who has since taken over the investigation from state prosecutors, has called Samsung’s contributions bribes that were exchanged for political favors from Ms. Park.
Mr. Lee and Samsung argued that the “donations” Samsung paid out to Ms. Choi were coerced, suggesting that the company was extorted. Ms. Park also denies any wrongdoing, saying that the donations from Samsung and other business were voluntary.
Mr. Lee’s arrest comes at a bad time for Samsung. His father, Lee Kun-hee, the chairman, has remained incapacitated since a heart attack in 2014. Under the younger Mr. Lee’s youthful but largely untested leadership, Samsung has tried to shed its stodgy image, vowing repeatedly to improve its corporate governance. That promise has sounded increasingly hollow in recent weeks, as new details of Samsung’s ties with Ms. Park and Ms. Choi have emerged.
Mr. Lee’s arrest also followed Samsung’s global recall of its Galaxy Note 7 smartphones, the most ambitious product launched under his leadership, which were prone to catch fire.
While his father remained bedridden, Mr. Lee and loyal executives have tried to speed up a transfer of management control over the conglomerate. Now those efforts have effectively backfired, with the prosecutor asserting that the 2015 merger, a crucial piece in the succession plan, was facilitated through bribery.
Samsung’s dozens of subsidiaries are run by professional managers. But in the cultlike corporate culture of the chaebol, only the so-called owner chairman can decide on multibillion-dollar investments, the kind of huge bets that have allowed Samsung to move quickly into a new market or stay ahead of its competitors in smartphones, memory chips and flat-panel screens.
Pro-business groups warned that Mr. Lee’s arrest would create a “management vacuum” at Samsung, leaving it leaderless and shy of investment. Many Koreans also fear that Samsung’s troubles would hurt the national economy. The conglomerate’s main company, Samsung Electronics, alone accounts for 20 percent of the country’s exports.
Over the decades, the South Korean government and the judiciary have often cited the impact on the economy when they decided not to arrest chaebol chairmen accused of white-collar crimes or gave them light or suspended sentences.
Mr. Lee’s father was twice convicted of bribery and tax evasion but has never spent a day in jail. Each time, he was pardoned by the president and returned to management. At least six of the nation’s top 10 chaebol, which generate revenue equivalent to more than 80 percent of gross domestic product, are led by men once convicted of white-collar crimes.