Prosecutors are seeking a warrant to arrest Samsung Group’s Jay Y Lee for allegations including bribery, a stunning turn for the scion of South Korea’s richest family groomed for decades to take over the company from his father.
Lee, 48, the de facto head of the Samsung Group and vice chairman of Samsung Electronics, is accused of participating in payments that Samsung made to a close friend of Korean President Park Geun-hye in exchange for government support in the company’s succession planning.
A special prosecutors’ team was established in December to investigate whether Samsung and other chaebol business groups contributed money to Choi Soon-sil, the Park confidant, in exchange for political favours. President Park has been already impeached and her powers suspended.
Samsung shares fell as much as 2,3% following the announcement. The company didn’t immediately have a comment on the arrest warrant.
The prosecutor’s office said in a text message Monday that they are seeking Lee’s arrest. A court still needs to determine whether to approve the warrant.
The prosecution jeopardises Lee’s ability to take over Samsung Group and risks further destabilising the leadership of Korea’s largest company. His father, chairman Lee Kun-hee, has been hospitalised since suffering a heart attack in 2014.
Samsung is now facing its second crisis in a matter of months, after it was forced to pull the Galaxy Note7 smartphone off the market last year because the device was catching fire.
The presidential scandal has gripped Korea for months, with millions taking to the streets to demand the ouster of President Park. Lawmakers questioned the heads of nine chaebol to understand whether they were pressured to give money to foundations controlled by Choi.
Then in recent weeks, investigators have focused on Samsung to determine whether the company made payments to gain the backing of Korea’s national pension fund for a controversial merger between Samsung affiliates in 2015.
Prosecutors have homed in on Samsung’s contributions to entities linked to Choi, including a billion-won (US$846 000) horse for her daughter and millions of dollars for riding lessons. The money allegedly was in exchange for helping ensure a smooth transfer of power at Samsung to the younger Lee.
One key question is whether the administration exerted pressure on Korea’s national pension service to support the controversial merger of two Samsung Group companies, Cheil Industries and Samsung C&T. The controversial deal was approved in 2015 and made it easier for Lee to gain influence over the sprawling conglomerate.
The merger of Cheil and C&T was opposed by activist investor Paul Elliott Singer and succeeded by a narrow margin, thanks to the support of the NPS, then the biggest shareholder of C&T. The special prosecutors have previously arrested Moon Hyung-pyo, former chairman of the pension service. Moon acknowledged that he pressured NPS officials to support the Samsung merger, special prosecutors said last month. — (c) 2017 Bloomberg LP
