Samsung Group staggers into the new year with judiciary risk load

Judiciary risk looms over South Korea’s top conglomerate Samsung Group as the prosecution filed for a nine-year sentence on its de facto head and Samsung Electronics Co. Vice Chairman Jay Y. Lee in the last hearing of a retrial at the Seoul High Court on bribery case whose ruling would be due next month.

Special prosecutors on Wednesday argued for a nine-year prison term for Lee on charges of bribing former President Park Geun-hye who was ousted from power and her friend Choi Soon-sil in return for favors to back his hereditary succession at the conglomerate in 2017. The Seoul High Court will make a new ruling on Jan. 18.

In the first trial, Lee was given a five-year prison term but he was freed after the appellate court reduced the period to two years and six months with four-year suspension. The Supreme Court however returned the case to the high court in August last year.

Ahead of the ruling next month, Lee on Wednesday gave his final testimony and pledged to make “Samsung a company loved and trusted by everyone” and “create a fine compliance system in which it can reject unreasonable outside pressure by complementing policies and changing corporate culture and mind attitude.”

Lee who had made a public apology before reiterated his promise to establish trust and divorce with past practices.

Ongoing judiciary risk can weigh down the country’s most valuable conglomerate and company.

Lee has been engaged court battles over four years after he faced prosecutorial investigation in November, 2016. He has been called in for questioning for 10 times and was under arrest warrant examination three times. Lee attended 82 trials so far.

Samsung Group faces a separate trial next month on charges of accounting fraud at Samsung BioLogics and its merger with Samsung C&T. Legal industry insiders expect the case to span over five years.

If the Seoul High Court delivers a fresh prison term, Samsung Group will not be able to carry out large-scale merger and acquisitions or new investments worth several trillions of won, noted Lee Kyung-mook, professor at Seoul National University.

“A considerable part of research and development and facility investments to catch up with Taiwan Semiconductor Manufacturing Company will inevitably be canceled or delayed,” Lee said.

Earlier, Lee pledged to invest a total 133 trillion won ($122.4 billion) in R&D and production facilities over 10 years to catch up with TSMC in foundry business. Under Vision 2030, Samsung aspires to dominate system chip as well as memory.

An unnamed senior official from Samsung Electronics said that there have been no large-scale merger and acquisitions since it acquired connected car technology leader Harman for 9.4 trillion won in 2016. The official noted that it has been difficult for the company to confidently carry out large-scale projects due legal engagement.

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