South Korean court approves arrest of Samsung heir

The Seoul Central District Court’s decision to issue a warrant to arrest Lee Jae-yong, 48, a vice chairman at Samsung Electronics and the only son of Samsung chair Lee Kun-hee. (Photo: Enhanced Wealth Limited/Facebook)

SEOUL, Korea, Republic Of—A South Korean court approved on Friday the arrest of a billionaire heir to Samsung accused of bribery and other charges in connection to a massive corruption scandal, a stunning decline for the princeling of South Korea’s richest family.

The Seoul Central District Court’s decision to issue a warrant to arrest Lee Jae-yong, 48, a vice chairman at Samsung Electronics and the only son of Samsung chair Lee Kun-hee.

The arrest of Samsung’s de facto leader will likely shock the business community and cheer the critics of chaebol, the South Korean family-controlled business conglomerates that dominate the economy.

It was seen as a test of the country’s judicial system that in the past had been lenient toward the powerful business elite families at chaebol for their white collar crimes, citing their contributions to the national economy.

The court said additional evidence showed there were enough reasons to take Lee into custody. Prosecutors can detain him for up to 20 days before formally indicting him.

The court dismissed prosecutors’ request to arrest Park Sang-jin, a president at Samsung Electronics overseeing external relations, saying that it was difficult to justify Park’s arrest given his position and role within the company.

Lee was waiting for the decision at a detention centre near Seoul overnight after a closed-door court hearing that lasted more than seven hours on Thursday. He was taken into custody while Park was released. Local media reported that Lee was sent to solitary confinement. The detention centre declined to comment, saying it cannot give out private details.

Samsung said it will continue to defend itself in court.

“We will do our best to ensure that the truth is revealed in future court proceedings,” it said in a statement.

Lee avoided arrest last month when the court said prosecutors did not have enough evidence. The special prosecution team, probing the influence-peddling scandal that led to the impeachment of the country’s president, said they had gathered more evidence to strengthen their case and made a second request.

The 48-year-old Lee being was groomed to succeed his father at the top of South Korea’s largest business empire founded by his grandfather. He had taken a bigger leadership role in recent years after the elder Lee fell ill in 2014. Though the ailing Samsung chair was convicted before, the 75-year-old has never spent time in prison.

Prosecutors accused Lee of giving bribes worth $36 million to President Park Geun-hye and her close friend Choi Soon-sil to win government favours for a smooth company leadership transition.

They are also investigating Lee on allegations of embezzlement of Samsung funds, hiding assets overseas and lying under oath during a parliamentary hearing.

The court decision could also help the prosecution team bring bribery charges against President Park Geun-hye whose powers were suspended in December by parliament. She is awaiting a decision by the constitutional Court on whether she will be permanently removed from the presidency.

Samsung was the biggest donor among dozens of South Korean companies that donated a total of nearly $70 million to two non-profit foundations controlled by Choi, the president’s friend. It also transferred millions of euros to Choi’s company in Germany that financed equestrian training of her daughter and funded money to a winter sports centre operated by her niece.

Samsung has denied that it offered bribes or sought any wrongful favours from the president.

Speaking to lawmakers in December, the Samsung vice chairman admitted having transferred funds to Choi’s company but denied that any favours were sought. The testimony prompted prosecutors to seek a perjury charge against him.

Prosecutors suspect that Samsung won government support for a controversial merger of two Samsung groups in 2015 that was a key step in the leadership transition from father to son.

The merger was opposed by some minority shareholders, who said the deal would hurt them while unfairly benefiting Lee and other members of Samsung’s founding family. But Samsung narrowly secured shareholder approval thanks in part to support from the National Pension Fund, its key investor. The current head of the pension fund was indicted last month over his role in pressuring the fund to support the merger.

The special prosecution office is also reportedly looking into whether the value of Samsung Biologics, which went public last year, was overpriced to benefit the Samsung founding family and also whether the fair trade commission gave any favours to Samsung in relation to its complex cross shareholding structure, which allows the Lee family to control the sprawling businesses with only a minority stake.

Lee’s father and ailing Samsung chair has been convicted in the past of embezzlement, tax evasion and breach of trust but was never imprisoned. After his latest conviction in 2008, he was pardoned a year later by the president, who said he would help South Korea’s bid to host the 2018 Winter Olympics.