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(News Focus) Samsung heaves sigh of relief as Lee avoids detention

All News 11:12 January 19, 2017

By Kim Deok-hyun

SEOUL, Jan. 19 (Yonhap) -- A sigh of relief was let out by Samsung Group officials Thursday after a Seoul court rejected a warrant to arrest the group's de facto leader, Lee Jae-yong, amid a snowballing corruption scandal that led to the impeachment of President Park Geun-hye.

Lee, vice chairman of Samsung Electronics Co. and the only son of the ailing Samsung Group Chairman Lee Kun-hee, left the Seoul Detention Center early Thursday after the court dismissed the warrant.

Samsung Electronics Vice Chairman Lee Jae-yong walks towards the main gate of the Seoul Detention Center, south of Seoul, on Jan. 19, 2017. (Yonhap)

In a statement, Samsung Group said it appreciated "the fact that the merits of this case can now be determined without the need for detention."

Still, Samsung is on alert as Lee is facing questions without detention over charges of bribery, embezzlement and perjury by special prosecutors investigating the scandal.

Samsung officials said the group would be managed by a group of top executives for the time being until Lee is cleared from the charges.

Lee Jae-yong, vice chairman of Samsung Electronics Co., gets into his car to leave the Seoul Detention Center south of Seoul on Jan. 19, 2017, after a local court rejected an arrest warrant sought for him. (Yonhap)

"It's a relief that (Vice Chairman Lee) has avoided detention, but he has not proven his innocence," a Samsung official said.

If a court rules that Lee is guilty of bribery and embezzlement, it would deal a blow to Samsung's brand image and global businesses, the official said.

Industry observers said Samsung could be affected by U.S. anti-corruption law, if Lee is convicted on charges of bribery and embezzlement.

Although Samsung Electronics is not listed on U.S. stock exchanges, there is a possibility that Samsung's businesses could be limited under the U.S. Foreign Corrupt Practices Act, they said.

In the latest development of the corruption scandal involving Park, special prosecutors requested an arrest warrant for Lee on Monday, accusing him of allegedly paying bribes totaling 43 billion won (US$36.5 million) to two foundations set up by Park's longtime friend Choi Soon-sil.

Prosecutors alleged that the bribes were paid to win favor from the country's state pension fund in 2015, when Samsung merged two of its affiliates, a move seen as critical for Lee's succession plan.

(News Focus) Samsung heaves sigh of relief as Lee avoids detention - 3

Park, who was impeached by the National Assembly last month, is awaiting the Constitutional Court's decision on whether to uphold her impeachment.

Samsung has argued that Park strong-armed it into making such donations to the foundations but did not seek business favors in return.

Lee has played a key role in making the group's business decisions since his father was hospitalized in 2014 after a heart attack.

Samsung officials have expressed serious concerns that a leadership vacuum would bring the group's key business decisions to a standstill.

With the scandal engulfing the group for months, Samsung has not conducted its annual personnel reshuffle and has failed to lay out its business targets for this year.

As Lee avoids a jail term, Samsung Electronics is expected to focus on its business priority, including a deal to take over a U.S. automotive electronics firm.

(News Focus) Samsung heaves sigh of relief as Lee avoids detention - 4

Last November, Samsung Electronics announced an $8 billion deal to acquire Harman International Industries Inc.

Some shareholders of Harman are expected to vote against the deal because they argue that the price is too low.

"As the arrest warrant for Vice Chairman Lee was dismissed, there is room for us to focus on other business issues," another Samsung official said.

Shares of major Samsung Group affiliates advanced Thursday after the arrest warrant for Lee was rejected.

Shares of Samsung Electronics rose 1.3 percent, and Samsung C&T were up 2.03 percent at one point in early Thursday trading.

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