[News Focus] Gloom hangs over Samsung again

As South Korea’s top court on Thursday ordered a review of the second ruling on the bribery case involving Lee Jae-yong, Samsung Electronics is again put at risk of losing its de facto leader at a critical time for the tech giant to push forward with new investments in technologies and jobs, amid harsh global trade and market conditions. 

The Supreme Court dismissed the appeals court’s ruling that had cut Samsung heir Lee’s sentence from five years to 2 1/2 years and suspended the jail term for four years in its verdict on the bribery case involving the Samsung chief, former President Park Geun-hye and her confidante Choi Sun-sil.

The top court judged that three horses worth a combined 3.4 billion won ($2.8 million) that Samsung gifted to the president’s friend Choi could be considered bribes, overturning the earlier court ruling that had excluded them.

It also noted that Samsung’s 1.6 billion-won donation to a sports foundation run by the Choi family was part of bribes given in return for government backing of Lee’s plan to inherit group control from his father Lee Kun-hee.

Depending on how the next court proceedings go -- particularly with the value of the bribery in question now to be as high as 8.6 billion won -- Lee could face additional jail time, in theory.

Immediately after the court decision was announced, Samsung released a statement, saying, “We deeply regret causing the citizens’ concerns due to this case. We will faithfully commit to our role as a business so as not to repeat the mistakes of the past.”

Adding that Samsung had faced many problems stemming from uncertainties both in and out of the country in recent years, the statement concluded by saying, “We ask for your help and support so that Samsung can recover from the current crisis in the midst of widening economic uncertainties in order to contribute to the nation’s economy.”

It is the first time for Samsung to release an official statement with regard to court rulings on Lee.

Industry watchers viewed that the group deemed it crucial to state its position, considering the imminent crises, to draw a line between the scandal and the company’s future by formally releasing an apology at a time where the legal processes still remain.

Samsung had hoped for the top court’s judgment to uphold the appeals court’s ruling that would have liberated its vice chairman from the presidential bribery scandal once and for all, due to aggravating business conditions at home and abroad. 

“Samsung is in the face of a ‘perfect storm’ of the ongoing export restrictions by Japan, trade conflicts between the US and China and profit falls amid downturns in semiconductor and smartphone markets, in which it is in dire need for the owner’s leadership,” said a senior official.

“It would be difficult for Lee to maintain his focus on business activities, which he has been recently showing by visiting each affiliate, when the trial process begins again.”

In the second ruling in February 2018, Lee was acquitted of most of the key charges against him by the appeals court, being convicted over a donation worth 3.6 billion won that enabled Choi’s daughter to ride horses. Lee was released upon the ruling.

Since then, Lee has tried to solidify his leadership at the group’s flagship unit Samsung Electronics by showing gestures of spearheading the company’s key businesses. 

Under Lee’s command, Samsung in April announced 113 trillion won in investments for logic chips, a major shift from its memory-focused business structure.

The heir also actively held meetings with key figures of the Moon Jae-in government to discuss current economic issues and support measures by businesses, including the latest Japan-imposed trade curbs.

However, with the top court’s differing view on the three horses worth a combined 3.4 billion won gifted to Choi, Lee’s bribery charges could be increased to as much as 7 billion won, which could affect the final ruling on Lee’s time behind bars. 

“It seems less likely that Lee would be imprisoned again, but it’s predictable that the scope of his business activities could be narrowed,” said an industry observer. 

The country’s business lobbying groups, the Korea Employers Federation and Federation of Korean Industries, voiced concerns in response to the top court’s ruling. 

“The business community shows regrets about the Supreme Court’s ruling amid the difficult business conditions,” a statement by FKI said. “In an era of infinite competition, it is worrisome that a following contraction in business activities of Samsung would hurt not only itself but also the whole Korean economy.”

Regarding the length of sentence, legal experts say that Lee could face a slightly increased amount of jail time, but the suspension could be maintained through a retrial. 

“A three-year imprisonment or three-year sentence with a suspension for five years is a likely conclusion of Lee’s case,” said a lawyer familiar with the case. “Considering that Lee had already been jailed for nearly a year and the current economic situation is harsh enough, the suspension is highly likely to be kept.”

By Song Su-hyun (song@heraldcorp.com)