Samsung Heir Is Found Guilty of Corruption in Blockbuster Trial


“The essence of this case is the unethical bond between politics and money,” said Judge Kim Jin-dong. “The people expect that the power of a president, the top authority under the Constitution, will be used to serve all people and that big businesses act with social responsibility, through legal economic activities.”

“Through this case,” he continued, “the people have come to question the fairness and honesty of the president and have come to distrust the ethical values of Samsung, the largest conglomerate.”

Mr. Lee was also found guilty of hiding assets overseas and of perjury for falsely testifying at a parliamentary hearing on the scandal. Other former top executives who advised Mr. Lee were also sent to prison or given suspended terms.

Mr. Lee, in a navy blue suit and white shirt, occasionally applied lip balm and kept a cool facial expression, which didn’t change as the verdict was announced, according to South Korea’s Yonhap News Agency. Mr. Lee, who has been in jail since he was arrested earlier this year, was led back into custody.

Mr. Lee’s attorneys immediately said they would appeal, and experts said it would likely go all the way to the country’s supreme court.

“As a legal professional, I cannot possibly accept any part of the lower court’s guilty verdicts,” said Song Wu-cheol, the lead defense attorney, who added, “I am confident that the appeals court will definitely find the defendants not guilty on all counts.”

Photo

Supporters of Park Geun-hye, the ousted president of South Korea, calling for the release of Mr. Lee outside the courthouse in Seoul.

Credit
Kim Hong-Ji/Reuters

Traditionally in South Korea, powerful executives who have been convicted of crimes have managed to avoid big prison terms through commuted sentences and even presidential pardons. Perhaps the most prominent example was Mr. Lee’s father, Lee Kun-hee, the second generation leader of Samsung who transformed its electronics business into a globally respected corporate name that competes with the likes of Apple and Sony. Twice convicted of tax evasion and bribery, the elder Mr. Lee never spent any time in prison.

This time could be different.

Public perception in South Korea toward the country’s biggest family-controlled business empires has changed in recent years as scandals have mounted and as the economy has matured, making them less appealing in an era of entrepreneurship and start-ups. In the wake of the corruption scandal — which led to the impeachment of Ms. Park — the current president, Moon Jae-in, campaigned on holding South Korea’s corporate empires to account.

“We hope this will be the first step in cutting the stubborn ties of corruption between politics and business, which has been a roadblock to progress in our society,” said Yoon Young-chan, senior secretary at the Blue House, the South Korean president’s executive office and residence.

The decision will test whether Samsung can succeed without the crown prince of the Lee family at the helm. The conglomerate includes the world-famous electronics maker as well as drug manufacturing, shipbuilding and other businesses. Mr. Lee has two sisters, but neither has been heavily involved in Samsung Electronics, which is widely regarded as the center of the Samsung empire. Some of South Korea’s family companies have also been famously controlled from jail cells. Lee Kun-hee, Mr. Lee’s father and the current chairman of Samsung Electronics, slipped into a coma three years ago.

Samsung may also be just fine without him. Samsung Electronics has turned in strong results and bounced back from an embarrassing spate of fires involving its Galaxy Note 7 smartphone, but Samsung has argued that Mr. Lee provides long-term strategic vision. Samsung’s businesses, including Samsung Electronics, are run by a bureaucracy of professional managers. During the trial, Mr. Lee said he had little involvement in Samsung’s day-to-day affairs and was often unaware of details of the business.

Still, Samsung says Mr. Lee has been critical to longer-term strategic decisions and its relationships with major global customers. With Mr. Lee in prison, wheeling and dealing with the leaders of Silicon Valley may be more difficult, and other major moves could be slowed.

Samsung is one of Korea’s family-controlled conglomerates called chaebol. If Lee Kun-hee dies, it could trigger the type of infighting seen in other chaebol families in recent years, said Park Sang-in, a professor of public administration at Seoul National University and a chaebol critic.

“Cronies inside Samsung will start taking sides, and this is a risky situation you can’t control from a jail cell,” he said.

Over the past six months, the arrest and trial of Mr. Lee have rocked South Korea. For decades, South Korea’s economic boom has been fueled by companies like Samsung. From abroad, these companies are largely admired for their technocratic prowess and competitiveness. But in South Korea they have come to be viewed more skeptically.

Within South Korea, public anger has risen over the dominance, power and lawlessness of the chaebols. The revenue of the 10 largest chaebols is more than 80 percent of South Korea’s gross domestic product. Among those 10 giants, the leaders of six have been convicted of white-collar crimes, with many being pardoned or having had their sentences commuted.

The Samsung trial has been portrayed within South Korea as a referendum on Seoul’s commitment to cracking down on what critics say is the coddling of South Korea’s top companies and their leaders.

Analysts have also argued that the companies’ economic dominance squelches small business and innovation.

Even so, it is not clear whether the victory will galvanize broader antigraft efforts.

“From the government’s perspective, this solves the short-term problem,” Mr. Park, the professor, said of the guilty verdict. “But it will face consistent calls from business lobbies to pardon Lee Jae-yong.”

Correction: August 25, 2017

An earlier version of a picture caption with this article, using information from Reuters, provided an incorrect photographer credit. The picture of Lee Jae-yong was a pool photo by Chung Sung-Jun; it was not taken by Lee Jae-yong.

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