Samsung chief Lee arrested in corruption investigation

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By Hyunjoo Jin | SEOUL

SEOUL Samsung Group chief Jay Y. Lee was
arrested early on Friday over his alleged role in a corruption
scandal that led parliament to impeach South Korean President
Park Geun-hye, dealing a fresh blow to the world’s biggest maker
of smartphones.

The 48-year-old Lee, vice chairman of Samsung Electronics Co
Ltd, was taken into custody at the Seoul Detention
Centre, where he had awaited the court’s decision following a
day-long closed-door hearing that ended on Thursday evening.

The judge’s decision was announced at about 5:30 a.m. (2030
GMT) on Friday, more than 10 hours after Lee, the sprawling
conglomerate’s third-generation leader, had left the
court.

The same court rejected a request from prosecutors last
month to arrest Lee. On Tuesday, the special prosecutor’s office
had requested a warrant to arrest him and another executive,
Samsung Electronics president Park Sang-jin, on bribery and
other charges.

However, the court rejected the request to arrest Park, who
also heads the Korea Equestrian Federation, saying it was not
needed given his “position, the boundary of his authority and
his actual role.”

The prosecution said it had secured additional evidence and
brought more charges against Lee in the latest warrant request.

“We acknowledge the cause and necessity of the arrest,” a
judge said in his ruling, citing the extra charges and evidence.

Samsung and Lee have denied wrongdoing in the case.

“We will do our best to ensure that the truth is revealed in
future court proceedings,” the Samsung Group said in a brief
statement after Lee’s arrest.

While Lee’s detention is not expected to hamper day-to-day
operation of Samsung Group companies, which are run by
professional managers, experts have said it could affect
strategic decision-making by the country’s biggest conglomerate.

The Samsung Group, a key driver of Asia’s
fourth-largest economy, has been engaged in a restructuring
process as it clears a succession path for Lee to assume control
after his father, Lee Kun-hee, was incapacitated by a 2014 heart
attack.

“It is not like Samsung’s business will be grinding to a
halt. There are many smart people at the company,” former
Samsung Electronics executive Kim Yong-serk said recently.

However, Lee’s arrest would have an impact on longer-term
investment decisions, said Kim, now a professor at Sungkyunkwan
University.

“Samsung presidents are evaluated on an annual basis, so
they cannot make bold bets about the future. They need a
chairman when making long-term investment decisions,” he said.

Samsung is also the world’s biggest maker of memory chips
and flat screen TVs.

ZEROING-IN

The arrest gives a boost to prosecutors who have zeroed-in
on Samsung Group to build their case against President Park and
her close friend Choi Soon-sil, who is in detention and faces
charges of abuse of power and attempted fraud.

Both Park and Choi have denied wrongdoing.

The office has focused its investigations on Samsung’s
relationship with Park, 65, who was impeached by parliament in
December and has been stripped of her powers while the
Constitutional Court decides whether to uphold her impeachment.

Prosecutors accused Samsung of paying bribes totaling 43
billion won ($37.74 million) to organizations linked to Choi to
secure the government’s backing for a merger of two Samsung
units.

That funding includes Samsung’s sponsorship of the
equestrian career of Choi’s daughter, who is in detention in
Denmark, having been on a South Korean wanted list.

If the decision is upheld by the Constitutional Court, she
will become South Korea’s first democratically elected leader to
be forced from office early.

Park remains in office but stripped of her powers while the
Constitutional Court decides whether to uphold her impeachment
by parliament.

“This is a painful event for Vice Chairman Lee,” said Kim
Sang-jo, a shareholder activist and economics professor at
Hansung University who was questioned by the special prosecutor
as a witness in the probe.

“But this will be an important opportunity for Samsung Group
to sever ties with the past,” he said, referring to links
between the government and the country’s conglomerates, also
known as chaebol. (Additional reporting by Joyce Lee and Ju-min Park)



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