Samsung heir faces long jail term in South Korea’s ‘trial of the century’

Until a few months ago, Lee Jae-yong was well on the way to securing his status as South Korea’s most powerful business leader.

But on Friday, the heir to the Samsung empire could be starting a lengthy prison sentence for his alleged role in a bribery and corruption scandal that has already triggered the impeachment of the country’s former president, Park Geun-hye.

Lee, AKA Jay Y Lee and Samsung’s vice-chairman and de facto head, has denied trying to seek political favours from Park in exchange for making large donations to foundations run by her close friend and confidante, Choi Soon-sil.

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The billionaire’s fate rests in the hands of the Seoul central district court, where a panel of judges will deliver a verdict on charges ranging from bribery to embezzlement and perjury.

The 49-year-old, who took over the reins at Samsung after his 75-year-old father, Samsung chairman Lee Kun-hee, suffered a debilitating heart attack in 2014, faces up to 12 years in prison.

More than 450 people applied for just 30 seats in the public gallery to witness what has been billed as the “trial of the century”. Millions of other South Koreans outside the courtroom will be glued to coverage of the first major legal battle prompted by a scandal that has rocked the country’s political and business worlds.

Samsung’s alleged involvement in the Park scandal has highlighted the collusive ties between politicians and powerful, family-controlled conglomerates – or chaebol – and called into question the foundations on which South Korea built its postwar economic success.

Public anger over Park’s conduct while in office has heightened pressure on the court to convict Lee. While he has denied that he paid bribes to further his career at a company founded by his grandfather Lee Byung-chul in 1938, Samsung executives have been accused of lying in their testimony to protect the younger Lee, who faces the longest prison term for any South Korean executive if convicted.

Lee allegedly offered $38m (£30m) in bribes to four entities controlled by Choi, to whom Park often turned for advice on policy, including Seoul’s strategy for dealing with the threat from North Korean missiles.

Samsung was the biggest single donor to the foundations which Choi had set up to support Park’s policy initiatives. Samsung has not denied donating money to the organisations, but said it was coerced to do so by Park; Lee claims the payments were approved without his knowledge.

The company is also accused of separately giving Choi millions of euros to fund her daughter’s equestrian training in Germany. In return, Lee allegedly sought government approval for the contentious $8bn merger of two Samsung affiliates in 2015 – a move that would cement his control of the Samsung group.

The merger was opposed by many shareholders, but went through after the national pension fund – a major Samsung shareholder – approved it.

A guilty verdict would represent a remarkable fall from grace for Lee, who is estimated to be worth $7.9bn, making him the third wealthiest person in South Korea.

His father’s ill health propelled him to the top of a huge business empire whose consumer electronics arm alone accounts for a fifth of all South Korea’s exports.

Once regarded as the heir apparent to the corporate giant built on mobile phones and TVs, but whose other interests, including hotels, shipbuilding, insurance and construction, reach into every area of the South Korean economy, he now faces a future simply as prisoner Lee.

If the court convicts – and his sentence is upheld on appeal, probably next year – the scion of South Korea’s richest family could serve his sentence at a crowded prison nestling in the hills north of Seoul.

While he wouldn’t be the first business leader to have served his time at Uijeongbu prison, Lee’s wealth and status would count for little.

He would probably be held in a single cell equipped with basics such as a TV and electric fan. Like other prisoners, he would be expected to carry out mundane work, and would be allowed outdoors for just one hour’s exercise a day. He would also be permitted to study English or Japanese and attend religious services.

Meanwhile, the family firm he was on the cusp of leading faces a period of unprecedented upheaval. Two days before he was sentenced, Samsung tried to project an air of normality with the launch of its latest smartphone – the Galaxy Note 8 – an attempt to banish memories of the disaster that befell its predecessor, the Galaxy Note 7.

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But Samsung’s denials that Lee made the payments in the expectation of political favours have left the firm ill-prepared for his possible imprisonment.

Although he is expected to appeal against a guilty verdict, his colleagues have reportedly not lined up an executive capable of making key decisions that were once made by Lee.

“There’s no one right now who’ll decide on group-wide issues,” an anonymous Samsung source told Reuters. “It’s not impossible to imagine a scenario where a Samsung affiliate gets into trouble and other units become entangled.”

Reports said Samsung has not even set up an internal body to plan for a possible leadership vacuum, and has no plans to resurrect its corporate strategy office – known as the “control tower” – which was disbanded in February amid criticism of its role in the scandal.

“I think Samsung faces major challenges in efficiently managing the entire group … it will struggle for a while to re-establish a strategic decision-making process,” said Kim Sang-jo, South Korea’s new antitrust chief.

Samsung said in a statement: “The corporate strategy office’s role was to support affiliates and coordinate with them, including mediating overlapping businesses and (their) different interests, but the final business decision was made by each company.”

Friday’s is the first in a string of court rulings that will bring closure of sorts to the Park scandal, but could leave its most powerful company effectively rudderless.

A verdict in the trial of the former president, who faces a possible life sentence, is expected in October.

Reuters contributed to this report.