Allegedly manipulating stocks, did Samsung’s ‘prince’ escape?

The past 4 years have been the period when the Vice Chairman of the largest capitalization corporation in the Korean stock market has often been in prison and appeared in court due to legal issues since he succeeded his father. Lee Kun-hee, who led the group more than 3 decades ago and died in 2020.

Allegedly manipulating stocks, did Samsung's 'prince' escape?  - Photo 1.

Prosecutors allege that the crown prince of Samsung manipulated shares in a merger that launched him into the position of successor to South Korea’s giant tech empire.

A merger step, the “prince” ascended the throne

The merger took place in 2015, when Cheil Industries, the fashion and entertainment company in which Lee is the largest shareholder, took over construction company Samsung C&T. Notably, C&T holds the largest stake in Samsung Life Insurance, which owns the majority of shares in Samsung Electronics, the “jewel” of the group.

Prosecutors argued that the merger terms in this deal were manipulated, when valuing 1 share of Cheil for nearly 3 shares of C&T. And it was this that gave Lee Jae-yong control, first of C&T and then of the Samsung group. Prior to the merger, Lee did not own any shares in C&T.

To date, a total of 11 group executives, including the “crown crown prince” Lee, are being investigated for stock price manipulation and accounting fraud at Samsung companies since 2015. Among them , 8 people have been found guilty and 3 are serving prison sentences.

This merger also contributed to the downfall of South Korean President Park Geun-hye, who was impeached and jailed on charges of accepting bribes in 2017. Accordingly, Lee transferred 8.7 billion won ( $7 million) to an acquaintance of former President Park so he could influence the National Pension Fund, the main shareholder of Samsung C&T.

On charges of giving bribes, Lee spent 19 months in prison, while Park had to “unpack” more than four years, before being pardoned by President Moon Jae-in on Christmas 2021.

Succession strategy has been prepared for a long time

Investment bank Goldman Sachs recommended Lee sell Samsung Life Insurance to billionaire Warren Buffett’s Berkshire Hathaway in 2015 to raise billions of dollars in inheritance tax payments, after chairman Kun-hee was hospitalized due to pain. heart 1 year earlier. However, this deal did not happen.

According to the 133-page indictment accessed by Nikkei Asia, Samsung was preparing for the succession, formulating the plan under the codename “Project G”, even before Mr. Kun-hee was hospitalized. In it, the letter “G” stands for the word “governance”. The plan has been detailed by Samsung Securities since 2012 and includes a controversial merger in 2015.

After Mr. Kun-hee was hospitalized, Mr. Jae-yong took over his father’s leadership role, but at that time the “crown crown” was still weak due to the sudden withdrawal of the chairman. Prosecutors believe that is why Lee and Samsung pushed for the takeover, despite objections from shareholders, so they could quickly take control of the empire without spending a lot of money or time. mobilize enough money to pay inheritance tax according to regulations.

“The decision of the Supreme Court on August 29, 2019 clearly states that Cheil Industries’ takeover of Samsung C&T is part of a plan to bring Lee to the throne,” quoted a press release from the Seoul Central Prosecutors’ Office.

Chaebol and the economic objective problem

The Samsung case is indicative of a larger problem that has been accumulating in South Korea for decades. Many criticize that the large corporations (chaebol) and the families that run them have received lenient treatment from the law in exchange for boosting the country’s economy. Chaebol reform has always been a traditional theme in presidential campaigns, but most pledges tend to “disappear” once a candidate takes office and faces reality.

“The government looked to the chaebol for help with the economy, then gave them privileges,” said Park Sang-in, an economics professor at Seoul National University.

“Crown Prince” Lee, after 19 months in prison with a 30-month sentence for bribery, was paroled ahead of time. The Blue House, the office of South Korea’s president, said the government made the decision “in the national interest” and denied special treatment in the case.

Two weeks after the senior leader was paroled, Samsung launched a plan to invest more than 240 trillion won ($195 billion) in the microprocessor, biology and telecommunications manufacturing sectors, with a pledge to create more 40,000 new jobs over the next 3 years.

In December 2021, President Moon invited Lee and other chaebol leaders to lunch together, praising the contributions of these corporations to a government-initiated youth employment project. Not only that, the Korean top leader also praised: “Samsung has nurtured ‘Samsung men’ with top skills, in line with the founder’s ‘talent first’ philosophy of the founder. “.

Yoon Suk Yeol, a key member of the Investigative Council of former President Park and “Crown Prince” Lee, became the new boss of the Blue House after the March 9 election. Although showing a tough attitude towards Lee personally, when it comes to chaebols, especially Samsung, the new President of South Korea shows a softer stance. This is understandable as voters want jobs and wage increases in the context of the economy struggling to recover from the pandemic and rising inflation with the uncertainty of the world situation.

The future of the “prince” of the Lee family and the Samsung empire will depend a lot on the new President’s determination to reform chaebol. It is still possible that Lee Jae-yong will go to prison again, but observers say that the days at the top of this character may not end soon.

According to Vinh Ngo

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