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Investigation nearing its end, Samsung heir Lee likely to be charged in high-profile succession case

All News 09:22 September 01, 2020

SEOUL, Sept. 1 (Yonhap) -- South Korea's prosecution is wrapping up its investigation of a succession case at Samsung Group and is likely to charge the group's heir Lee Jae-yong for his role in a controversial merger and alleged accounting fraud, legal sources said Tuesday.

It is believed that the prosecution will go ahead and charge Lee without detention as early as Tuesday with stock manipulation and violation of capital market laws in relation to the 2015 merger between two Samsung affiliates, Cheil Industries Inc. and Samsung C&T, and alleged accounting fraud at the pharmaceutical unit of Samsung Biologics.

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

Prosecutors suspect that Lee, the vice chairman of Samsung Electronics, was involved in a companywide scheme to plan the merger and fraud in a way to take over control of the country's biggest conglomerate from his ailing father, Lee Kun-hee, who suffered a heart attack in 2014.

They, in particular, believe that the value of Cheil, of which Lee was the largest shareholder with a stake of 23.2 percent, was inflated and that of Samsung C&T was lowered intentionally prior to the merger.

Lee is also suspected of being part of the alleged plan to inflate the value of Samsung Bioepis, a joint venture between Samsung Biologics, a subsidiary of Cheil Industries, and the U.S.-based Biogen Inc.

He has consistently denied the allegations since the investigation started in November 2018.

But prosecutors have shown confidence that there is sufficient evidence to support the charges against Lee.

Since this year, prosecutors have intensified the investigation, calling in incumbent and former Samsung senior executives over the case, including Choi Gee-sung and Kim Jong-joong, who had led the group's now-disbanded control tower, the Future Strategy Office. In May, Lee was brought in twice for investigation.

In a turn of events that Lee hoped would help his case, the prosecution's independent panel recommended on June 26 to drop charges against Lee, citing difficulties substantiating some of the prosecution's claims.

The 14-member panel, including one chairperson, concluded by 10-3 that the prosecution's investigation into the high-profile succession case was not warranted, following a lengthy discussion at the Supreme Prosecutors Office in southern Seoul.

Since the recommendation, prosecutors have gathered various opinions from management and accounting professors and experts in efforts to build up a case against Lee.

Filing charges against Lee might come as a surprise, given the fact that the prosecution has accepted most recommendations by the panel since the system was introduced in January 2018 to keep its power in check and guarantee the fairness of its investigations.

This composite image shows Samsung's heir and de facto leader Lee Jae-yong against a background of the prosecution's logo and building. (Yonhap)


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