Samsung's biz decisions could be in limbo during chief's 4-week prison quarantine

[Photo by Lee Chung-woo]

Decision-making at South Korea’s No. 1 conglomerate Samsung Group could be in limbo for the next four weeks as its chief has been isolated at a Seoul detention center and is denied of any meetings with outside under a new quarantine code for inmates.

Samsung Electronics vice chairman Jay Y. Lee is placed in solitary confinement in a Seoul prison for four weeks as part of the new code for cells following cluster outbreak in a detention center. No visitors would be allowed save for his legal counsel, meaning all major business decisions could be put on hold during this period.

Lee was sentenced to two and a half years in prison Monday in a retrial ordered by the Supreme Court. He had been convicted in 2017 for bribing a confidante of Korea’s former president but walked out a free man when the term was suspended. He will serve one and a half years because his prior time in jail for a year has been counted.

Lee tested negative for the virus on Monday but would have to be retested four weeks later.

Chief executives of individual Samsung affiliates currently run the day-to-day operations, but they would have to find ways to work around major investment decisions during Lee’s absence, a Samsung official said.

Lee has experience in managing the company behind bars in 2017. Under his order, Samsung Electronics disbanded the future strategic team, which functioned as the group’s control tower, and announced plans to invest 30 trillion won ($27.3 billion) through 2021.

The latest leadership vacuum is reminiscent of the elder Lee’s absence in 2008.

[Photo by Yonhap]

Samsung Electronics faced a 23-month-long setback after Lee’s late father, Lee Kun-hee, then Samsung’s chairman, was convicted in 2008 on embezzlement and tax evasion charges. In the final quarter of 2008, the company logged a 740 billion won loss. It rushed to bring its own smartphone to market following Apple’s iPhone but the first-generation Omnia turned out to be a flop.

During that time, the company also wavered on big investment decisions. In September 2008, it announced it was seeking to buy America’s SanDisk, then the world’s largest flash memory company, for $5.85 billion but walked away from the deal in less than a month. Samsung Electronics’ new business team took off in 2006 but failed to make significant headway except in biosimilars.

Samsung recovered only after the elder Lee returned to the helm in March 2010. Samsung’s flagship Galaxy S hit the markets in June 2010 and overtook the iPhone for the first time in the third quarter of 2011 to become the world’s best-selling smartphone.

Observers say the younger Lee’s absence could be longer than that of his father, casting doubt on the future of the Korean tech giant.

Moreover, Lee faces a separate trial over a controversial 2015 merger of two Samsung units that allegedly helped tighten his grip over the company. He and other Samsung executives were indicted last year on charges including illegal transactions, stock manipulation and perjury.

The trial has been postponed indefinitely due to Covid-19. Legal experts say it could stretch for up to five years as it is a more complicated case than the latest corruption trial, which took four years to reach a final ruling.

Lee is also accused of accounting fraud at the pharmaceutical unit Samsung Biologics.

Another factor weighing on the Samsung scion is the nearly $10 billion inheritance tax bill he has to pay following his father’s death in October.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]