Samsung Vice Chairman Lee Jae-Yong has been embroiled in legal troubles for the past few years. He is facing a retrial for his role in the alleged forced merger of Cheil Industries Inc. and Samsung C&T and the accounting fraud at Samsung Biologics. Today, the South Korean prosecution is expected to announce the results of the investigation, likely indict Lee, and charge him without detention.
Lee could be face charges related to accounting fraud, stock manipulation, and violation of capital market laws. Prosecutors suspect that Samsung Group’s current de-facto leader in a company-wide scheme to plan an illegal merger so that he could take over the control of the company from his ailing father, Lee Kun-Hee, who suffered a heart attack in 2014. Although Lee has denied these allegations, prosecutors believe that there is enough evidence of his wrongdoing.
Prosecutors believe that Lee operated a scheme to inflate the value of Cheil Industries and deflated the value of Samsung C&T before the merger. Lee was the largest shareholder of Cheil Industries, with a stake of 23.2 percent. These decisions allowed Lee to take control of the Samsung Group from his father. He was also reportedly a part of a plan that inflated the value of Samsung Bioepis, a joint venture of Samsung Biologics (a subsidiary of Cheil Industries) and US-based Biogen Inc.
The South Korean prosecution accelerated the investigation this year and called former and incumbent senior executives at Samsung over the case. Choi Gee-Sung and Kim Jong-Joong were summoned along with Lee for questioning. Kim Jong-Joong used to lead Samsung Group’s now-disbanded control tower, the Future Strategy Office.
Lee had hoped that the recommendation of the prosecution’s independent panel to drop charges citing difficulties in substantiating some of them would make the case go away. The board of fourteen members had concluded on June 26 by 10-3 that the prosecution’s investigation in the high-profile succession case was not warranted. However, prosecutors still managed to build up a case against Lee after gathering opinions from various accounting professors and management.