Samsung Heir Freed, to Dismay of South Korea's Anti-Corruption Campaigners
SEOUL, South Korea — When Lee Jae-yong, the de facto leader of Samsung, walked free on Monday after spending barely a year in jail, it reaffirmed a pattern South Koreans have fought for decades to break: business tycoons convicted of corruption here hardly spend any time behind bars.
Mr. Lee’s arrest a year ago, and his subsequent conviction and sentencing, were hard-won victories for millions of protesters who took to the streets from late 2016. The demonstrations also felled President Park Geun-hye, impeached on charges of collecting bribes from family-controlled conglomerates, known as chaebol, like Samsung.
But here in South Korea, Mr. Lee’s detention was as big a piece of news as Ms. Park’s ouster. His father — Lee Kun-hee, the son of Samsung’s founder and the conglomerate’s chairman — was twice convicted of bribery and other corruption charges but never spent a day in jail, creating an image of Samsung as untouchable. Many South Koreans hailed the lower-court ruling, which sentenced the younger Mr. Lee to five years in prison on corruption charges, as an important milestone in their country’s long-running campaign toward greater transparency and accountability.
So when an appeals court freed Mr. Lee, 49, on Monday by reducing his prison term to two and a half years and then suspending it, the scene was dishearteningly familiar for many.
Over the decades, numerous chaebol executives have been paraded into courts on bribery and other charges. But they have usually walked away with light sentences (most of them suspended), free to manage their businesses, even as courts routinely sentenced lesser-known white-collar criminals to far longer terms for lesser offenses.
That led to criticism that the conglomerates were too powerful to tame — a problem President Moon Jae-in repeatedly decried when he rode waves of popular discontent to win an election in May to replace Ms. Park.
“This is a critical setback for the country,” said Jun Sung-in, an economist at Hongik University in Seoul. “This case once again shows why the South Korean judiciary does not have the people’s trust when it comes to cases involving chaebol chieftains.”
Samsung is arguably South Korea’s brightest corporate success story, as the country transformed from a war-torn agrarian economy into a global export powerhouse.
In the span of a few decades, the company, once a copycat manufacturer of clunky television sets, surpassed Sony and other global giants in value and reach, offering high-end smartphones, computer chips and flat-panel TVs. It is the biggest and most lucrative of a handful of chaebol conglomerates that dominate South Korea’s economy.
But it is not universally beloved. At home, Samsung is often seen as a menace with unbridled power. Mr. Lee — known as Jay Y. Lee in the West — is a third-generation tycoon whose qualifications as a top manager are regarded with skepticism, if not downright scorn. Unlike their fathers and grandfathers, this latest set of business leaders stand accused of inheriting management control and wealth through opaque bookkeeping and questionable trading among subsidiaries.
The verdict Monday will only deepen that unsavory image of Samsung, while “disappointing numerous people who have hoped that this case would serve to end politics-business collusion,” said Chung Sun-sup, editor of chaebul.com, a website that specializes in monitoring the family conglomerates.
Mr. Lee’s supporters say he has been made a scapegoat for politically motivated prosecutors. They accused the authorities of pandering to widespread anti-chaebol sentiments and building their case against Mr. Lee with little evidence.
Prosecutors had originally indicted Mr. Lee on charges of giving or promising $27 million in bribes to foundations and business entities controlled by Choi Soon-sil, a longtime confidante of Ms. Park, to win Ms. Park’s support for strengthening his control of Samsung, which he is inheriting from his ailing father.
But the lower-court ruling recognized only about $8 million as bribes. In Monday’s ruling, the size was reduced further to $3.3 million. Park Young-soo, the special prosecutor investigating the case, said his team would appeal to the Supreme Court.
The latest ruling was closely monitored because it could also affect Ms. Park, whose corruption trial is still underway.
Mr. Lee’s lawyers acknowledged the payments but argued that Samsung did not receive any favors or special treatment in return. Instead, Mr. Lee said he was a victim of Ms. Park’s extortion — an argument Justice Chung Hyong-sik sided with, to a degree, in his appeals court ruling.
“This is a case where President Park intimidated the management of Samsung,” Mr. Chung said, calling Mr. Lee a “passive” provider of bribes.
Shortly afterward, Mr. Lee emerged from prison a free man.
“I want to say once again how sorry I am that I have failed to present a good image of myself,” Mr. Lee told reporters. “The past year has been a valuable time for me to reflect.”
Pro-business groups, investors and conservative politicians welcomed the verdict.
“In a time of worsening business environments, incarcerating businessmen for a long time does tremendous damage not only to their companies but also to the national economy,” said Kim Kyong-man, an executive at the Korea Federation of Small and Medium Business.
The jewel of the Samsung group’s empire, Samsung Electronics, grew into a global force by identifying and getting ahead of big shifts in technology. It charged into the semiconductor business, for instance, when the company was still known as an assembler of cut-price TVs. The company also began focusing on slick, astutely marketed consumer products just as public enthusiasm for gadgets started ramping up in the 2000s.
Today, the semiconductor business accounts for the bulk of the company’s profit and, with demand for powerful servers and data centers continuing to rise worldwide, it is expected to continue to rake in money. Samsung is also the world’s largest seller of smartphones.
Credit for those successes, however, goes largely to Mr. Lee’s grandfather and father. Industry observers have long questioned whether the Harvard-educated Mr. Lee, who had not been known for running a business by himself before he was thrust into his present role, can safeguard the company’s success.
His first high-profile venture was eSamsung, a start-up incubator that went belly-up during the dot-com collapse of the early 2000s. He later headed up a joint venture with Sony to make flat-panel screens and, in 2007, was made the company’s first “chief customer officer.”
But he stepped down the next year to develop new businesses in emerging markets. He then served as Samsung’s president and chief operating officer, before becoming vice chairman in 2012.
More recently, Mr. Lee has shown greater initiative in steering Samsung toward the technologies of tomorrow.
In 2016, he oversaw the $8 billion purchase of Harman International Industries, an American maker of car audio systems. Harman has become part of Samsung’s push to create an ecosystem of internet-enabled devices, from refrigerators and phones to cars and televisions, with which users can conduct their digital lives.
The big unknown on Samsung’s horizon today, however, is China. The government in Beijing is pouring billions of dollars into local companies with the aim of dominating advanced computer chips, and potential challengers to Samsung are emerging.
“That’s going to be a huge threat,” said Nam Lee, a professor at Chung-Ang University in Seoul. “It’s not imminent, I would say. But nobody can guarantee the future.”
That means Samsung could still use a far-thinking leader to chart out the company’s next strategic moves.
“One thing is very clear,” Professor Lee said, “J. Y. Lee has not proven if he’s the one.”
Choe Sang-hun reported from Seoul, South Korea, and Raymond Zhong from Hong Kong.
Follow Raymond Zhong on Twitter: @zhonggg.
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