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(LEAD) Samsung heir Lee Jae-yong attends arrest warrant hearing over succession probe

All News 10:26 June 08, 2020

(ATTN: UPDATES lead paras; MODIFIES last 5 paras; CHANGES photos)

SEOUL, June 8 (Yonhap) -- The de facto leader of Samsung Group, South Korea's largest conglomerate, appeared in court Monday for a hearing to decide whether he will be arrested again amid allegations of his involvement in a merger and accounting fraud.

Lee Jae-yong, vice chairman of Samsung Electronics, showed up at Seoul Central District Court in southern Seoul. The hearing will likely last at least several hours, as many expect the court's decision to come out late in the night or early Tuesday morning.

He is under probe in connection with the controversial merger of two Samsung affiliates in 2015, an apparent key process in his takeover of control of the group from his ailing father, Lee Kun-hee.

Last week, the Seoul Central District Prosecutors Office sought an arrest warrant for the Samsung scion, arguing he should be put back in jail, given the seriousness of his alleged wrongdoings and the possibility of destroying relevant evidence. It is a prelude to a widely expected indictment against Lee.

Lee Jae-yong, vice chairman of Samsung Electronics, appears at Seoul Central District Court in southern Seoul on June 8, 2020, for a hearing on the prosecution's arrest warrant request against him. (Yonhap)

Prosecutors also requested arrest warrants for two former Samsung executives, Choi Gee-sung and Kim Jong-joong, who had led the group's now-disbanded control tower, the Future Strategy Office.

The three are accused of engaging in unfair trading, stock price manipulation and violation of laws on external audits.

Kim faces an additional charge of making a false testimony in court.

Investigators suspect the group's top management of having been deeply involved in what they believe was a systemic effort to help the father-to-son transition of Samsung's leadership. Lee's father suffered a heart attack in 2014.

They, in particular, believe that Lee was involved in a scheme to inflate the value of Cheil Industries Inc. and lower that of Samsung C&T prior to the merger in 2015.

Lee and his aides were also suspected of inflating the value of Samsung Bioepis, a joint venture between Samsung Biologics and the U.S.-based Biogen Inc., by approximately 4.5 trillion won (US$3.64 billion).

Samsung Biologics is a subsidiary of Cheil Industries, of which Lee was the largest shareholder, with a stake of 23.2 percent.

Lee Jae-yong, vice chairman of Samsung Electronics, appears at Seoul Central District Court in southern Seoul on June 8, 2020, for a hearing on the prosecution's arrest warrant request against him. (Yonhap)

The probe began in November 2018 when the Securities and Futures Commission under the Financial Services Commission filed a complaint against Samsung Biologics over suspicions of accounting fraud. Prosecutors have since expanded the probe with suspicions that the alleged accounting fraud might have been aimed to help Lee assume control.

Up until now, they have questioned Lee and several other former and incumbent Samsung executives over the top management's role in the 2015 merger. They include Choi Gee-sung, former head of the Future Strategy Office, and Chang Choong-ki, former deputy chief of the office.

Samsung has said that it has never deliberately manipulated the value of its companies and the prosecution has wrongly viewed the 2015 merger as related to its management succession.

If the warrant is approved, it will be the first time in 28 months that Lee will be arrested for criminal charges.

Lee was imprisoned for about a year in 2017 for bribing a confidant of former President Park Geun-hye in return for her administration's support for the 2015 merger.

He was released in February 2018 after his sentence was suspended by an appeals court. But the Supreme Court ordered a retrial last year revising the size of the bribes.

In early May, Lee made a rare public apology over the group's involvement in the scandals. He vowed not to hand over his Samsung managerial rights to his children.

The prosecutors' requests for arrest warrants came just two days after Lee called for a public assessment of the validity of the way that they have conducted the probe and a possible indictment.

The system for a review of the prosecution service's investigation by an external panel was introduced in 2018 to enhance neutrality and fairness of its probes into cases that are of great public interest.

Business circles, including Samsung, have criticized the prosecution for ignoring its own reform measure by requesting the warrant while a legal procedure for convening the outside panel was under way.

If the request for the arrest warrant against Lee is rejected, the panel is expected to have a greater influence over the prosecution's move to indict him. Doubts would grow over the committee's efficacy, however, if the warrant is issued.



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