Samsung boss denies wrongdoing as South Korea prosecutors seek jail term over 2015 merger

Seoul — Samsung Electronics chairman Jay Y Lee denied wrongdoing on Friday after South Korean prosecutors called for him to be jailed for five years on charges of accounting fraud and stock price manipulation involving an $8bn merger of Samsung affiliates in 2015.

The hearing is the final lower court session before a ruling, expected within months, ending a trial that has lasted three years.

The case is the last against Lee, who was pardoned for an earlier, separate conviction and last year cemented his leadership position of Samsung as executive chairman.

During Friday’s hearing at Seoul Central District Court, prosecutors accused Lee, 55, and other former executives of violating the Capital Markets Act to make possible the 2015 merger that helped Lee assume greater control of the group’s flagship Samsung Electronics.

Prosecutors called for Lee to be jailed for five years for his alleged involvement in the merger of group affiliates Samsung C&T and Cheil Industries, suspecting stock price manipulation and other wrongdoings that helped the defendants gain at the expense of minority investors.

“The defendants undermined the foundation of the capital market to ease the leader's succession,” the prosecution said.

“They abused the authority granted by the company and shareholders for the private interests of the group leader and abused extreme imbalance of information.”

Meet society’s demands 

Lee and the executives denied wrongdoing, saying the merger and accounting processes that prosecutors have taken issue with were part of normal management activities.

“I have never had my personal interests in mind in the course of the merger,” Lee told the court.

“It never crossed my mind to harm other shareholders to increase my stake. I and the other defendants thought the merger would help both companies. I thought it would meet the demands of society to make governance transparent and simplified.”

Lee said the merger was part of continuous efforts to pre-empt rising uncertainties, currently exemplified by geopolitical risks, global supply chain reorganisation, and the faster-than-expected impact of generative AI on chips and other businesses.

The defendants’ lawyers said the prosecution failed to reflect evidence that came to light during some 106 hearings in the three-year trial, including the views of most minority shareholders, the outcome of the merger, and the South Korean government’s own findings in an international dispute with hedge fund Elliott.

Analysts said an acquittal could give Lee more room to pursue major strategic decisions, particularly in M&A.

Lee was previously convicted of bribing former South Korean President Park Geun-hye and went to jail for a total of 18 months from 2017 to 2021. He was subsequently paroled in 2021 and pardoned in 2022. 

Reuters