Samsung’s Jay Y. Lee Walks Free As Prosecution Pursues ‘Fraud’ Charges

The Samsung empire’s embattled leader, Lee Jae-Yong, a.k.a. Jay Y. Lee, is a free man yet again.

The latest episode in the long-running legal drama of the de facto chief of South Korea’s biggest conglomerate ended after a long day in court and then hours waiting for a judge to decide whether to hold him for trial on charges of manipulating stock in a bid to insure his power over the empire. 

District Court Judge Won Jung-Sook rejected the prosecution’s demand for jailing Lee and two other Samsung executives charged with unfair trading and manipulating the value of Samsung shares in the merger of two key Samsung companies. Lee emerged silent behind a white face mask from the court building where he had been awaiting the decision on the prosecution’s request to hold him while the case drags on.

The decision not to jail Lee, who had already been held for a year in a separate but related case, marks an important milestone in efforts to clear Lee of charges that he engineered the takeover of Samsung C&T by Cheil Industries in order to facilitate the transition of the group to his control. Lee’s title is executive vice chairman of Samsung Electronics, the centerpiece of the group, while his father, Chairman Lee Kun-Hee, credited with having built Electronics into a global force after inheriting control from founder Lee Byung Chul, remains incapacitated several years after suffering a massive heart attack. 

Judge Won found “insufficient explanation on the need to arrest the defendants against the principle of trial without detention” since “the basic facts have been all explained and prosecutors seem to have already secured considerable amount of evidence through its investigation.”

The decision to let Lee and two other executives walk free came as a relief for Samsung in a cascading succession of events that has shaken not only Samsung but also the country’s leadership for the past four years.

Lee was imprisoned for a year, from February 2017, on charges that he had bribed a close confidante of Park Geun-hye as president in order to win her nod of approval for the merger, which came about only after the government’s enormous National Pension Service voted its shares in favor. The case led to headlines, “My Kingdom for a Horse,” since the bribe included giving horses to the confidante’s daughter, an expert in dressage who rode in Germany.

Samsung is still appealing the finding of guilt in that case, for which his sentence of two and a half years in prison was suspended. That case was the key factor in bringing about the Candlelight Revolution of 2016 that led to the conservative Park’s impeachment, trial and imprisonment. The liberal Moon Jae-in was elected president in a special election in May 2017.

The prosecution was disappointed by the latest ruling, calling it “a shame” in view of “the seriousness of the case and a trove of evidence,” but left no doubt the case was far from over, vowing to “do our best to continue the investigation.”

Although Lee remains free for now, the prosecution was expected to consider another request for jailing him while seeking his conviction.

“Samsung has been doing everything it can to paint a good image before the final trial verdict of Jay Lee,” said Geoffrey Cain, author of “Samsung Rising,” a book that covers Samsung’s rivalry with Apple as well as its role in Park Geun-hye’s downfall.

“Inherited leadership is the root of Samsung’s legal troubles,” said Cain, predicting that Lee’s legal entanglements aren’t like to end soon. “The charges are too serious, involving the impeachment and imprisonment of a former South Korean president…The courts must realize they can’t imprison the president for taking bribes, and then let Jay Lee off the hook for allegedly giving those bribes.”

Lee’s lawyers issued a statement saying the the decision showed the arrest warrant ignored “basic facts,” failing to explain the criminal charges against Lee.

Samsung has repeatedly denounced as “groundless” the claim that the value of the prices of shares in Samsung C&T were greatly undervalued to facilitate its takeover by Cheil. Lee holds 23.2% of the shares in Cheil, a pivotal subsidiary that manufactures a range of chemical products. The combined company retained the name of Samsung C&T.

A secondary aspect of the case is that the prosecution also accuses Lee of having overvalued Samsung Bioepis, a Cheil subsidiary that’s owned jointly by Samsung Biologics and Biogen, Inc., a U.S. company. The prosecution sees the overvaluation of Samsung Bioepis as intrinsic in Lee’s attempt to consolidate his control.