South Korean prosecutors have requested a five-year prison sentence and a fine of 500 million KRW (approximately $375,000) for Samsung Electronics Chief Jay Y. Lee in an appeals court on Monday.
The case revisits allegations of stock price manipulation and accounting fraud tied to a 2015 merger of Samsung subsidiaries, a move that allegedly helped Lee consolidate control over the tech giant. This comes ten months after Lee and 13 former Samsung executives were acquitted of these charges.
A final decision in the appeals case is anticipated between January and February 2025, according to local reports.
Prosecutors argue that Lee’s actions undermined the integrity of the capital market and could set a precedent for reforming chaebol, South Korea’s powerful family-controlled conglomerates. They emphasized that leniency could encourage similar unlawful practices in corporate restructuring.
The controversial merger involved Samsung C&T, the company’s construction unit, and Cheil Industries, its textile affiliate, in 2015. Prosecutors allege that the merger inflated stock prices and involved fraudulent accounting at Samsung Biologics, which was partly owned by Cheil.
These moves reportedly allowed Lee to tighten his control over the conglomerate’s operations.
Prosecutors first sought the same sentence and fine in November 2023, asserting that the $8 billion merger breached the Capital Market Act. They claimed the merger prioritized Lee’s personal interests, disregarding lawful corporate governance.
Lee, however, defended the merger during the hearing, asserting that it adhered to standard operational procedures.
The case is seen as a litmus test for South Korea’s ongoing corporate governance reforms. Prosecutors stated that the ruling would serve as a reference for future restructuring within chaebol and accounting practices.
The trial also comes as Samsung, the world’s largest memory chip manufacturer, faces challenges amid slowing profits, adding to the significance of the case for South Korea’s economy and its global tech ecosystem.
Lee’s legal troubles date back years. In 2020, he and other executives were indicted for pushing the Cheil-Samsung C&T merger to gain managerial control. Prosecutors accused the group of inflating Cheil’s stock price to facilitate the deal and alleged fraudulent accounting practices at Samsung Biologics.
This high-profile legal battle reflects broader efforts in South Korea to reform corporate governance and address the concentration of power in chaebol structures. The outcome could reshape Samsung’s trajectory and impact the country’s broader technology and corporate landscape.
