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South Korean Court Clears Samsung Heir of Financial Crimes in Landmark Ruling

Payam Javan: Samsung Electronics Chairman Lee Jae-yong has been acquitted by a South Korean court of financial crimes related to a controversial 2015 merger between Samsung affiliates. The court ruled that the prosecution failed to sufficiently prove that the merger between Samsung C&T and Cheil Industries was unlawfully conducted with the intention of strengthening Lee’s control over Samsung Electronics. This decision follows Lee’s pardon less than two years ago for a separate bribery conviction in a corruption scandal. Activists and critics criticized the ruling, questioning how Lee could be found innocent given his prior conviction for bribing a former president.

Prosecutors had sought a five-year jail term for Lee Jae-yong, accusing him of stock price manipulation and accounting fraud related to the 2015 merger. The court’s decision was met with mixed reactions, with supporters praising the confirmation of the merger’s legality, while critics argued that it represented a setback for efforts to reform the management culture of South Korea’s family-owned conglomerates and their ties with the government. Lee, a third-generation corporate heir, officially became chairman of Samsung Electronics in October 2022, leading the Samsung group since 2014.

Lee Jae-yong had previously served 18 months in prison for bribery charges related to the 2015 deal, which played a crucial role in solidifying his control over the Samsung business empire. The controversy surrounding the merger included opposition from some shareholders, public anger over the national pension fund’s stake decline, and allegations of accounting fraud to inflate the value of a subsidiary. Despite the legal challenges, Samsung Electronics has faced business difficulties, reporting a 34 percent decline in operating profit for the October–December quarter, primarily due to sluggish demand for consumer electronics products.

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