International review Investigation

Samsung Heir Is Found Guilty of Corruption in Blockbuster Trial

Lee Jae-yong, the heir to the Samsung business empire, arriving to court in Seoul, the capital, on Friday. He was sentenced to five years in prison. Source: Credit Pool photo by Chung Sung-Jun.

This material belongs to: NY Times.

SEOUL, South Korea — A South Korean court on Friday convicted Lee Jae-yong, the heir to the Samsung business empire, of bribery and embezzlement, sentencing one of South Korea’s most important magnates to five years in prison and breaking with the country’s history of dealing light penalties to major business figures.

The decision may embolden South Korea’s leaders to put further pressure on the country’s family-controlled business empires, which helped build an economic powerhouse out of the ashes of the Korean War but are now widely seen as sources of corruption and impediments to the country’s progress.

It will also test whether Samsung — a conglomerate that includes the world-famous electronics maker as well as drug manufacturing, shipbuilding and other businesses — can succeed without the crown prince of the Lee family at the helm. Samsung Electronics has turned in strong results and bounced back from an embarrassing spate of fires involving its Galaxy Note 7 smartphone, but Samsung has argued that Mr. Lee provides long-term strategic vision.

The court on Friday said there was sufficient evidence to side with prosecutors’ charges that Mr. Lee spent $6.4 million bribing the government, expecting to gain state support for a controversial merger of two Samsung-controlled companies. Through a complex web of shareholdings, that deal bolstered Mr. Lee’s control over Samsung Electronics, the conglomerate’s crown jewel.

Mr. Lee was also found guilty of hiding assets overseas and of perjury for falsely testifying at a parliamentary hearing on the scandal. Other former top executives who advised Mr. Lee were also sent to prison or given suspended terms.

“The essence of this case is the unethical bond between politics and money,” said Judge Kim Jin-dong. “I hope that power will be used to serve all people and that big businesses will act with social responsibility, through legal economic activities.”

The defense attorneys said they would appeal and declined to comment further.

Other big South Korean corporate figures have been convicted in the past only to avoid prison time, like Mr. Lee’s father, Lee Kun-hee. The elder Mr. Lee, who built Samsung into a global consumer electronics powerhouse that competes with the likes of Apple and Sony, was twice convicted of tax evasion and bribery, but he never spent any time in prison.

Still, there is reason to believe this time could be different. In the wake of the corruption scandal — which led to the impeachment of former President Park Geun-hye — the current president, Moon Jae-in, campaigned on holding South Korea’s corporate empires to account.

The ruling is a major coup for civic groups that have pushed for a crackdown on the corrupt ties between politicians and the country’s richest families.

It also presents a new minefield for the Lee family as it seeks to manage one of the world’s largest corporate empires.

While Samsung’s businesses, including Samsung Electronics, are run by a bureaucracy of professional managers, Samsung says Mr. Lee has been critical to longer-term strategic decisions and its relationships with companies like Apple and Google. With Mr. Lee in prison, wheeling and dealing with the leaders of Silicon Valley may be more difficult, and other major moves could be slowed.

It also creates a potential succession crisis for the Lee family. Lee Kun-hee, the current chairman of Samsung Electronics, slipped into a coma three years ago.

Samsung is one of Korea’s family-controlled conglomerates called chaebol. If Lee Kun-hee dies, it could trigger the type of infighting seen in other chaebol families in recent years, said Park Sang-in, a professor of public administration at Seoul National University and a chaebol critic.

“Cronies inside Samsung will start taking sides, and this is a risky situation you can’t control from a jail cell,” he said.

Over the past six months, the arrest and trial of Mr. Lee have rocked South Korea. The case links South Korea’s most important company to a blockbuster corruption scandal that took down Ms. Park, the former president.

That has shaken the political and economic foundations of a country long seen as one of the world’s most successful growth stories. For decades, South Korea’s economic boom has been fueled by companies like Samsung.

From abroad, these companies are largely admired for their technocratic prowess and competitiveness. But in South Korea they have come to be viewed more skeptically.

Within South Korea, public anger has risen over the dominance, power and lawlessness of the chaebols. The revenue of the 10 largest chaebols is more than 80 percent of South Korea’s gross domestic product. Among those 10 giants, the leaders of six have been convicted of white-collar crimes, with many being pardoned or having had their sentences commuted.

The Samsung trial has been portrayed within South Korea as a referendum on Seoul’s commitment to cracking down on what critics say is the coddling of South Korea’s top companies and their leaders.

Analysts have also argued that the companies’ economic dominance squelches small business and innovation.

Even so, it is not clear whether the victory will galvanize broader anti-graft efforts.

“From the government’s perspective, this solves the short-term problem,” Mr. Park, the professor, said of the guilty verdict. “But it will face consistent calls from business lobbies to pardon Lee Jae-yong.”