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(LEAD) Samsung heir questioned over 2015 merger of key affiliates

All News 10:59 May 26, 2020

(ATTN: UPDATES with more details from 3rd para; CHANGES photo)

SEOUL, May 26 (Yonhap) -- Samsung heir Lee Jae-yong was summoned to the prosecution Tuesday to be questioned about suspicions surrounding the top conglomerate's controversial merger of two leading affiliates in 2015.

Lee, vice chairman of Samsung Electronics, appeared before prosecutors at the Seoul Central District Prosecutors Office at around 8 a.m. to face questioning about the Samsung management's decision-making process in the merger of Samsung C&T Corp. and Cheil Industries Inc. five years ago.

This file photo shows Lee Jae-yong, vice chairman of Samsung Electronics. (Yonhap)

It is Lee's first attendance at the prosecution since February 2017, when he was grilled and arrested for allegedly offering bribes to a confidante of former President Park Geun-hye.

Lee's arrival was not open to the media, and prosecutors will not make public when the questioning will end, in accordance with a recently revised rule on handling criminal cases. Lee was reportedly called in his capacity as the accused.

Prosecutors suspect Samsung's top management was involved in the conglomerate's efforts to facilitate Lee's managerial succession from his ailing father, Lee Kun-hee, and may have intentionally lowered the value of Samsung C&T prior to its merger with Cheil Industries to help benefit the heir apparent.

Lee was the largest shareholder in Cheil Industries, an affiliate that produces textiles, chemicals and electronic chemical materials, with a stake of 23.2 percent, which means a fall in the valuation of Samsung C&T paves the way for a merger ratio advantageous to the Samsung heir.

Prosecutors are looking into suspected inflation in the value of Cheil Industries ahead of its merger with Samsung C&T. In one instance, the official land value of Everland, the nation's largest theme park owned by Cheil, surged 370 percent in 2015.

At that time, Samsung C&T was suspected of downsizing the volume of its overseas construction orders and domestic housing construction contracts. Samsung C&T also reported an 11 percent decrease in sales in the first half of 2015 and suffered steady falls in its stock prices, which led to a merger ratio of 1:0.35 favorable to Cheil Industries.

Prosecutors have also been investigating suspected window dressing by Samsung Biologics in 2015, allegedly orchestrated by Samsung Group to overvalue Cheil's stake in the conglomerate's bio business.

Through the merger, Lee was able to secure control of Samsung C&T, a de facto holding company of Samsung Group.

Prosecutors have already questioned Choi Gee-sung, former head of Samsung's now-disbanded control tower Future Strategy Office, Chang Choong-ki, former deputy chief of the office, and several other former and incumbent Samsung executives over the top management's role in the 2015 merger.

ycm@yna.co.kr
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