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Samsung in trouble as heir faces graft case verdict

SEOUL

The heir to the Samsung empire faces the verdict in his corruption trial on Friday, which threatens to leave the world’s biggest smartphone maker rudderless for more than a decade.

Lee Jae-Yong, vice-chairman of Samsung Electronics and the son of Samsung group chairman Lee Kun-Hee, has been groomed all his life to take over the giant conglomerate founded by his grandfather in 1938.

It is by far the largest of the chaebols, the family-controlled firms that dominate Asia’s fourth-largest economy, which some South Koreans self-mockingly dub the “Republic of Samsung”.

Its turnover is equivalent to a fifth of the national GDP and it has long had close, opaque connections with political authorities.

But now prosecutors have demanded a 12-year sentence for Samsung’s 49-year-old “crown prince” if he is convicted of charges including bribery and embezzlement in connection with the corruption scandal that brought down president Park Geun-Hye.

Park, dismissed from office in March after public fury, is on trial separately accused of offering policy favours to tycoons including Lee who enriched her secret confidante Choi Soon-Sil, with Samsung handing over around $40 million.

Lee has been detained during his trial, and the prospect of his being imprisoned for years has sent shockwaves through Samsung, where the founding family’s rule has been taken for granted for decades.

The Lee clan directly owns about five percent of Samsung Electronics shares, but maintains its grip on the wider group through a byzantine web of cross-ownership stakes involving dozens of companies.

Although Samsung’s day-to-day business is maintained by the elite CEOs at each unit, analysts say they would be unwilling to make — and take responsibility for — costly decisions over large-scale acquisitions or investments without family approval.

Agence France-Presse