Samsung Heir Summoned for Questioning in Succession Probe
Prosecutors Summon Samsung Heir Over Merger, Accounting Probes
(Bloomberg) -- South Korean prosecutors have summoned Samsung Electronics Co. Vice Chairman Jay Y. Lee for questioning in an ongoing investigation into alleged accounting fraud and a controversial 2015 merger of two Samsung affiliates, dealing another legal blow to the country’s largest corporation.
While expected, the decision marked a deepening of a long-running probe into the billionaire scion and his shipbuilding-to-smartphones Samsung Group conglomerate. The company’s de-facto leader was called into Seoul Central District Prosecutors Office at 8 a.m. local time Tuesday in relation to allegations over illegal acts in succession plans, the Yonhap News Agency reported. The summons came after the executive publicly apologized over his company’s role in scandals over his succession, which eventually led to the impeachment of former president Park Geun-hye. A spokesman at the agency confirmed Lee has been summoned, without elaborating.
Lee has been at the center of a years-long scandal and graft trial that inflamed long-standing resentments against Korea’s most influential family-run conglomerates. He faces renewed charges of using gifts of expensive horses to win favor from the previous administration, which he has denied. The legal fight has disrupted his tenure at the helm of Samsung Electronics, the world’s leading producer of smartphones and memory chips. This month, the billionaire took the unusual step of apologizing for his role in the controversy, pledging his children would never run the conglomerate.
“I give my word here today that from now on, there will be no more controversy regarding succession. There will absolutely be no infringement against the law,” Lee said at a hastily convened press conference at the time. “There will be no leaning on legal expediency or actions that cause ethical reproach. My sole focus will be on enhancing the corporate value of Samsung.”
The prosecutors office’s probe, which is separate from the corruption trial, centers on whether there were illegal acts during a merger between Samsung C&T Corp. and Cheil Industries -- the conglomerate’s de-facto holding company. That deal was regarded as an effort to cement Lee’s control over the conglomerate, which he has run since his father suffered a heart attack in 2014. Prosecutors are also likely to interrogate the heir about allegations of financial fraud at Samsung Biologics Co. The agency hasn’t brought any charges in the case so far. A Samsung Electronics spokeswoman declined to comment on Tuesday.
Samsung Group, South Korea’s largest conglomerate with more than $400 billion of market value, has grappled with legal issues for years. Dozens of current and former executives have been questioned, indicted or arrested over charges that range from graft and accounting issues to union-busting. Lee was imprisoned for about a year until his release in early 2018, then returned to court for a retrial last year when the scope of the alleged wrongdoing was revised. He again faces the possibility of jail.
The current prosecutors’ probe kicked off after the country’s Financial Services Commission in 2018 said Samsung’s biotechnology unit “intentionally” violated accounting rules surrounding an initial public offering. The regulator said at the time the unit deliberately overstated the value of Samsung Bioepis Co. ahead of its 2016 IPO. Critics argued that Samsung Group orchestrated the accounting change to benefit the merger of Samsung C&T and Cheil Industries, which made Lee the largest shareholder at Samsung’s de-facto holding company and bolstered his succession plans.
Samsung Biologics has denied the allegations and said its books were examined by external accounting firms, and that it had no impact on the 2015 merger as that was completed before the bio firm’s accounting change.
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